Facing growing calls from within his party to withdraw from Israel's government over the peace process deadlock, Israeli Defense Minister Ehud Barak instead bolted from the Labor Party to form a breakaway parliamentary faction that would preserve his alliance with Prime Minister Benjamin Netanyahu.

The surprise move from the party leader and former prime minister threw Israel's political system into turmoil. Rival Labor cabinet ministers immediately resigned from the government, taking their rump party – which monopolized Israeli politics for 30 years after the state's creation – into the parliamentary opposition.

Mr. Barak and the Labor party have been seen by the United States as key forces in driving the diplomatic peace process. The move will curtail Barak's sway in the cabinet, while shifting power to ultranationalist Foreign Minister Avigdor Lieberman and the ultra-religious Interior Minister Eli Yishai.

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Though the splintering of the dovish Labor party won't topple the Netanyahu government, it shrinks the prime minister's majority to 66 from 74 seats in the 120-member Knesset. And it reshapes the government's profile as that of a narrow alliance of hawkish and religious parties, rather than that of a broad coalition straddling the political center.

Government defections have historically triggered prolonged coalition unravelings, leading to elections. But some analysts say that the departure of Labor parliamentarians, who have been threatening for months to leave over the moribund peace process, gives the government more cohesion.

"The coalition is undergoing changes, and it introduces an element of instability,'' says Chemi Shalev, a political commentator for the daily newspaper Yisrael Hayom. "I'm not sure that Washington will appreciate the change, because they will think that it gives less sway to Barak.''

The splintering of Labor potentially strengthens the position of opposition leader Tzipi Livni and her center-left Kadima party as the sole governing alternative to Netanyahu. It is unclear who will fill the Cabinet vacancies; it could be lawmakers from Barak's new faction or other coalition members.

The division in Labor developed after Barak joined Netanyahu's Likud party in the government following a drubbing in the 2009 elections. Barak defended the move by insisting that Labor's presence in the government was necessary to boost peace moves.

But after the Palestinians walked out on direct talks with Israel last fall, and the failure of attempt to revive the talks, Labor parliamentarians have been restless. One broke off from the party last week.

"We are leaving a party and a home,'' Barak said at a press conference at which he announced the creation of a five-member faction called "Independence.'' "We reached the conclusion that the political anomaly, in which there were actually two Labor factions, must cease.''

Announcing his resignation from the cabinet as social welfare minister, Yitzhak Herzog – one of eight remaining Labor lawmakers in the Knesset – said it had come time "to stop lying to ourselves and resign from this government that brought us to a deadlock in the pursuit of peace and forced on us Avigdor Lieberman and his party in a racist discourse that threatens our democratic regime.''

Analysts say the splintering of Labor marks a milestone in the demise of Israel's political left, which has been steadily shrinking ever since Barak presided over the failure of the Oslo peace talks with the Palestinians in 2000. Labor and its forerunner, Mapai, were the party of Israel's founding prime minister, David Ben Gurion, and enjoyed uninterrupted rule from 1948 to 1977.

Though some analyst speculated Labor's fortunes could be revived with a charismatic leader, others speculated the party is beyond repair.

"It’s a historic story about a party that led the Zionist movement with huge success and ended up in this ridiculous state. It’s a story about a party that lost its battle with Likud,'' says Hebrew University political science professor Gideon Rahat. "Just imagine that the Democratic or Republican party will disappear.''