The veteran leader of the Israeli right is opposed to current peace talks between Israel and the Palestinian Authority and has called for a tougher policy towards Iran. Mr Netanyahu is also a committed supporter of free-market reforms and economic liberalisation.

Tuesday's political debate followed an internal election for the Likud party list that produced several high-profile victories for far-right activists. They came in spite of efforts by Mr Netanyahu to sideline politicians such as Moshe Feiglin, who won a slot on the list that virtually guarantees him a seat in the next Knesset, the Israeli parliament. Moderate Likud candidates favoured by Mr Netanyahu performed less well than expected.

Mr Feiglin is the leader of a far-right platform within the Likud party that calls for the annexation of the occupied Palestinian territories and encourages the expansion of settlements in the West Bank. His extremist views led to a decision by the UK Home Office in March to ban Mr Feiglin from entering Britain.

Ehud Olmert, the departing Israeli prime minister, said it was clear that Mr Feiglin and other senior Likud candidates were "extreme rightists and in my opinion will cause much political harm to the state of Israel".

Tzipi Livni, the foreign minister and leader of the centrist Kadima party, said: "The list is not my problem, it's Bibi's problem. It's a weight around his legs, not mine."

Ms Livni is widely seen as Mr Netanyahu's main rival in February, though she has lost ground to him in opinion polls. Mr Netanyahu, who served as prime minister between 1996 and 1999, put a brave face on the internal setback on Tuesday, describing the Likud party list as "a new leadership for Israel" and the "best team that any party could have in our country".

He can, in any case, console himself with the latest polls, which show Likud pulling away from Kadima and winning up to 37 seats in the 120-seat Knesset.

Even if Likud emerges as the strongest party from the election, Mr Netanyahu will need to form a coalition with other parties to be elected prime minister. With Mr Feiglin and other far-right politicians high on the Likud list, centrist parties such as Kadima will now be even keener to avoid a coalition with Mr Netanyahu, potentially leaving him short of a majority or forcing him to turn to rightwing and religious parties for support.

The Likud surge stands in marked contrast to the fate of Israel's centre-left Labour party, which has seen its support plummet since Ehud Barak, another former prime minister, took over as leader last year.

Once seen as Israel's natural party of government, Labour is predicted to win no more than 10 seats in the Knesset, an outcome most likely to condemn Mr Barak and his allies to political irrelevance for the next four years.

The Labour leader is defence minister in the current ruling coalition, a role for which the former general and army chief-of-staff has won plaudits from military analysts.

However, Mr Barak's abrasive style and hawkish policies have alienated not only other Labour officials, sparking a number of high-profile defections, but also the party's traditional supporters. If the polls prove correct, Mr Barak's stance will drive many Labour voters into the arms of smaller leftwing parties or Ms Livni's Kadima group.

Labour woes were deepened by lapses during its own party primary last week: electronic voting had to be abandoned after the system crashed, forcing a manual poll two days later. One newspaper described Labour last week as "crushed, dying and now a laughing stock".