P By John Ward Anderson

rime Minister Ariel Sharon dissolved the Israeli parliament and called for early elections, giving up on attempts to form a new government with right-wing allies to replace his collapsed national unity coalition.

Sharon’s decision ended a week of political haggling that began when the Labor Party resigned Oct. 30 from his broad alliance, ostensibly over budget allocations. He tried to lure smaller ultranationalist and Orthodox Jewish parties to join his Likud Party in a narrow-based government. But Sharon said those parties made “unacceptable” demands that amounted to “blackmail” and “extortion,” leaving him six votes shy of a majority in the 120-member parliament.

Analysts said it was unlikely any progress could be made in resolving the Palestinian-Israeli conflict during an Israeli election campaign, meaning that contacts between the Israeli government and Yasser Arafat’s Palestinian Authority will likely be reduced, providing an opportunity for tension to rise and violence to continue.

“It’s going to be very dangerous,” said the Palestinian minister for local government and chief negotiator with the Israelis, Saeb Erekat. “The competition between (former prime minister Benjamin) Netanyahu and Sharon will translate into more Palestinian blood, more occupation and more incursions.”

The vote will be held Jan. 28. In the meantime, Sharon will head a caretaker government.

Sharon’s right-wing Likud Party has not yet set a date for its primary elections, but Sharon is expected to face a tough challenge from Netanyahu, who has been one of Sharon’s toughest critics from the right since Netanyahu became foreign minister in the caretaker government.