The former trade union leader engaged in hand slaps with journalists, demonstrating a warm, informal style. 'I'm going to surprise everyone,' he said, his dark eyes staring above the greying moustache that is his trademark. Mr Peretz wore a dark suit, but as always, no tie.

Just by being in the running and reviving through his campaign the old egalitarian ethos of the Labour movement that founded the Jewish state, the Moroccan-born Mr Peretz, 52, has already shaken up Israeli politics. But lacking previous cabinet experience, he is widely seen as unfit to hold the top office, at least for now.

While the election is anything but a nail-biter, analysts say this campaign could mark a political turning point for Israel both internally and in its policies towards the Palestinians.

Mr Peretz is trying to engineer a mini-revolution by drawing poorer Israelis from Middle Eastern (Sephardic) backgrounds away from their traditional home, the hard-line nationalist and unabashedly capitalist Likud party, and into dovish Labour's fold. Labour, which polls give 20 seats, is running a distant second to Kadima, with 37, according to a poll published in Haaretz newspaper. Benjamin Netanyahu's Likud has 16, according to the poll.

In a country where ethnic tensions even within the Jewish majority still bubble close to the surface, Mr Peretz's very leadership of Labour, long dominated by Jews of European origin such as Shimon Peres, the former prime minister he defeated in a November leadership contest, is a major change. Analysts say a large number of wealthier Labour voters from European Jewish backgrounds followed Mr Peres when he quit Labour for Kadima after his defeat. But about an equal number of poor Sephardic voters have switched to Labour because of Mr Peretz, analysts say.

More significant for Israel's external relations is the transformation being capped by Mr Olmert, a veteran cabinet minister, former Jerusalem mayor and the self-styled heir to the widely popular Ariel Sharon, architect of last summer's withdrawal from the Gaza Strip, who was felled by a stroke in January. Mr Sharon's incapacitation came shortly after he broke with Likud to form the new Kadima party.

Kadima's success will in effect confirm the clinical death of the peace process, already mortally wounded by the victory of the radical Hamas movement in the Palestinian elections in January.

By endorsing Kadima, which advocates Israel drawing its own permanent borders by 2010, the critical mass of Israeli voters will be rejecting both the traditional left-wing approach espousing a peace agreement with the Palestinians and the right-wing approach that Israel should retain all of its settlements in the West Bank.

Kadima backers and independent analysts say the party's expected victory will signal the crystallisation of a new centre in Israeli politics favouring a further unilateral pullout in the West Bank as a follow-up to last summer's evacuation of settlements from the Gaza Strip. More than five years after the failed Camp David summit with Yasser Arafat and the eruption of the Palestinian uprising with its suicide bombings, Israelis are convinced there is no Palestinian peace partner.

And the victory of Hamas, which calls for Israel's destruction, has reinforced that.

Lior Horev, a Kadima campaign strategist, said: 'Most Israelis are not looking for peace with Palestinians. They are looking for quiet, they are looking for security and they want the [West Bank] fence to be high enough so they don't have to see them any longer.'

Despite the public perception in Israel that all the blame for the collapse of diplomacy is on the Palestinian side, Mr Sharon and Mr Olmert undermined prospects for negotiations with the Palestinians by raising 14 objections against the international peace blueprint known as the roadmap when it was issued in 2003. These objections negated all of the roadmap's main points.

Mr Olmert this week pledged to annex the large Ariel settlement, about 20km inside the West Bank, to Israel, and says he will try to gain international backing for Israeli annexation of other settlements. Israel's army raid on a Palestinian Authority prison in Jericho this week boosted Mr Olmert's security credentials, which had been under sharp attack by Mr Netanyahu.

Labour's main television spot starts not with combating terror, which Mr Peretz says every party will do, but with the worsening plight of the elderly and the need for a universal pensions law. Mr Peretz's foremost promise is to raise the minimum wage to US$1,000 a month.

His remarks to a gathering of artists this week harkened back to his origins. He grew up in a poor, remote town, Sderot in the Negev desert in southern Israel. 'I still live in Sderot,' Mr Peretz said. 'Sderot is where I take my strength from and all my energies from and also where I take all my ideology from.'

Sderot is close to the Gaza Strip Palestinian town of Beit Hanoun and comes under frequent Kassam rocket fire from there. 'I hope the hills that separate Sderot and Beit Hanoun over which the Kassams fly will one day become hills in which children from the two nations play with each other,' Mr Peretz said.