A Palestinian rammed his car into a group of Israeli soldiers in Jerusalem on Monday, hours after Foreign Minster Tzipi Livni agreed to try to form a new government that can avert an election and forge a peace deal.
The man, who neighbors said lived in Jerusalem, was shot dead after injuring 15 of the soldiers and four others, under the walls of the Old City on a road that marks the dividing "Green Line" between Arab East Jerusalem and the Jewish west.
Police described it as a "terrorist" attack, the third of its kind using vehicles against Israelis in the city since July. There was no immediately credible claim of responsibility.
Livni tries to build government
It highlighted the security problems Livni faces as she seeks to build a workable government following the resignation of Prime Minister Ehud Olmert over a corruption scandal.
It is far from certain she will succeed in building a new coalition and failure may well mean a parliamentary election, which polls indicate would favor the right-wing opposition.
Two of those hurt were in a serious condition, medics said.
A police spokesman said a soldier and then a policeman fired at the driver. He lay dead in the road by his black BMW car.
"It was a terror attack," police spokesman Micky Rosenfeld said, adding that a soldier and a policeman shot the driver.
The soldiers were on a late-night educational tour of the city ahead of next week's celebration of the Jewish New Year.
Dozens of ultra-Orthodox Jews gathered nearby. Some chanted "Death to Arabs". Police fired tear gas to disperse them.
Twice in July, Palestinian construction workers using earthmoving equipment attacked Israelis in Jerusalem, in one case killing three. Both were shot dead.
Jerusalem dispute
In both those incidents, the drivers were Palestinians with Israeli identity documents giving them free access to Israel and Jerusalem. Residents in the Arab east of the city identified the man killed on Monday as a neighbor with similar documents.
The earlier incidents, as well as a shooting attack in March in which eight Jewish seminary students were killed, prompted calls in Israel for restrictions on Palestinians living on the Israeli side of the barrier Israel is building around the West Bank.
Those areas, in East Jerusalem and neighboring parts of the West Bank, were annexed by Israel to Jerusalem in a move not recognized internationally, following their occupation by Israeli forces in the Six Day War of 1967.
The future status of Jerusalem, where both Israelis and Palestinians want to have their capitals, is a key issue in U.S.-sponsored negotiations that Livni and Olmert have been conducting with Palestinian President Mahmoud Abbas.
After President Shimon Peres invited her to form a new government, Livni called on her right-wing opponents to join a unity coalition that would embrace the political spectrum.
Daunting struggle
There was no indication, however, that Benjamin Netanyahu, the former premier who leads the opposition Likud party, would drop his demand for an early parliamentary election instead -- an election which opinion polls suggest he could win with ease.
Livni was elected last week to succeed Olmert as leader of the centrist Kadima party, after he said he would quit to fight accusations of corruption over which he could be indicted.
The 50-year-old commercial lawyer and one-time agent of the Mossad spy agency, faces a daunting struggle to build a workable parliamentary majority from among the 13 parties represented in the Knesset. Until she does, Olmert will remain as caretaker.
"My priorities are to try and form a national unity government and maintain the present coalition," she told a news conference after meeting Peres on Monday evening. "Otherwise I will lead the Knesset to new elections as soon as possible."
If Livni cannot win parliamentary approval within six weeks, an election is the likely outcome. If she succeeds, she will be Israel's first woman leader since Golda Meir in the 1970s.
Livni has been in consultations across the spectrum, notably with Labor party leader Ehud Barak, whose leftist party is the second biggest in the outgoing government, and with the Jewish religious parties which always play a key role in coalitions.
The political uncertainty has dimmed even further prospects of an Israeli-Palestinian peace deal, which the United States had hoped Olmert and Abbas could achieve this year before President George W. Bush leaves office.