Israeli police advised prosecutors to stop the inquest into whether Prime Minister Ehud Olmert illegally intervened in the government's sale of a bank, supporting him as he prepares to resume peace talks with Palestine.
The threat of indictment in the case has cast a cloud over Olmert for months. However, police are still conducting two other corruption-related investigations against the prime minister that could still weaken him in the future.
In the bank case, Olmert is suspected of trying to rig the privatization of Bank Leumi in 2005 in favor of two associates, Australian real estate developer Frank Lowy and American billionaire S. Daniel Abraham. The two businessmen never submitted formal bids for the sale, and Olmert has denied wrongdoing in the case.
Police interrogated Olmert for a total of nine hours in two sessions at his official Jerusalem residence in October.
Investigators concluded there was insufficient evidence to indict, police spokesman Micky Rosenfeld said. "There are no grounds for pressing charges against Olmert in the Bank Leumi case," he said.
Their conclusions were forwarded to Attorney General Meni Mazuz, who will make the final decision to indict. That decision is expected to take months, legal commentators said, though it appears unlikely he will prosecute.
Olmert's office declined to comment.
The police decision came hours after Olmert returned to Israel from Mideast peace summit in the U.S., where he agreed to relaunch formal peace talks with the Palestinians. Police had originally planned to issue their recommendation earlier this week, but put it off because of the summit.
Olmert's troubles are far from over. Earlier this year, an initial government report into last year's war in Lebanon was highly critical of his performance. Although his popularity has begun to recover, a second report is expected in the coming weeks. A damaging report would weaken him politically and could put pressure on him to step down.
He also faces two more police investigations. In one, he is suspected of buying a Jerusalem home at a substantial discount in exchange for arranging construction permits for the seller. In a separate case, police believe Olmert steered a lucrative government grant to a political supporter while he was trade minister.
Olmert has been repeatedly dogged by corruption allegations throughout his three-decade career in politics. He has denied any wrongdoing and has never been convicted.