Barak: 'I hope that we are in the first step for unity, change and new hope for Israel' RELATED AUDIO: Ehud Barak reacts to the news of his victory 320 K/7 sec. AIFF or WAV sound  ISRAEL ELECTIONS: RELATED VIDEO 'The people have decided': Netanyahu concedes defeat and steps down as leader of the Likud Party Real 28K 80K Windows Media 28K 80K A major issue this year has been the economy. Israel is in a recession, and that has hurt Netanyahu. CNN's Richard Blystone explains. (May 17) Real 28K 80K Windows Media 28K 80K To view the latest video streams on the Israeli elections, use the arrow buttons below to scroll through the video gallery.        Windows Media Real        28 K 80 K  IN-DEPTH SPECIAL: Israeli elections

May 17, 1999
Web posted at: 5:29 p.m. EDT (2129 GMT)

In this story: Netanyahu warned by election board Knesset expected to be fragmented Three candidates drop out Voting ends personality-driven campaign RELATED STORIES, SITES

JERUSALEM (CNN) -- With exit polls handing challenger Ehud Barak a landslide victory, Israeli Prime Minister Benjamin Netanyahu conceded defeat late Monday and announced he was stepping down as leader of the Likud Party.

"The people have decided, and we respect the people's wish," Netanyahu said in a speech soon after hearing the exit poll results.

Netanyahu supporters watched in stunned silence as Israel's Channel One projected Barak would capture 58.5 percent of Monday's vote, leaving Netanyahu far behind with 41.5 percent.

Another exit poll, conducted by Israel's Channel Two, gave Barak 57 percent versus 43 percent for Netanyahu.

Though Netanyahu has repeatedly criticized polls as being inaccurate, the predicted wide margin of defeat apparently convinced him he could not win.

"I want to congratulate Ehud Barak for winning the election," Netanyahu said. He then announced he was quitting leadership of Likud for a "recess," but added: "I still have a lot to give to this country."

Barak cautiously welcomed the exit poll results but did not explicitly declare victory, remembering that in the last election, in 1996, exit polls initially gave Shimon Peres victory, though Netanyahu ended up winning.

"I hope that we are in the first step for unity, change and new hope for Israel," Barak said.

A smiling Palestinian Authority President Yasser Arafat welcomed Barak's victory after meeting with U.S. diplomats to discuss the results.

"I respect the outcome of the Israeli elections and I congratulate Mr. Barak," Arafat told reporters. Asked if he believed Middle East peace efforts would now move forward, Arafat replied: "We hope so."

A Barak victory promised to bring with it a resumption of talks that ground to a standstill during Netanyahu's three years in office.

While Netanyahu froze peace talks with the Palestinians in December and has imposed a long list of conditions on resuming them, Barak has staked out a positions as a moderate who wants to move the process along.

His campaign for prime minister also focused on Netanyahu's weak points -- social and economic issues.

However, voters told pollsters throughout the campaign they didn't see much difference on the issues between Netanyahu and Barak. The key has been Netanyahu's personality and whether not he can be trusted, analysts said.

"Israeli voters have to decide if Netanyahu is a liar, and if he is a liar, is he a big liar, and if so, is that good for Israel," said Dan Margalit, a writer for the Ha'aretz newspaper.

Netanyahu warned by election board

Netanyahu: 'I still have a lot to give to this country' RELATED AUDIO: Netanyahu announces his resignation as Likud Party leader 384 K/17 sec. AIFF or WAV sound

Netanyahu, who trailed the Labor Party leader by around 10 points in pre-election surveys, had furiously trawled for votes Monday among his traditional bedrock constituency of working class Jews of Middle Eastern or North African origin.

He also appeared on pirate religious radio stations, trying to turn out his ultra-Orthodox Jewish supporters. Broadcast appearances on election day are illegal in Israel, and the Israeli Central Election Commission threatened Netanyahu with a restraining order if he did not stop the appearances.

Netanyahu predicted a come-from-behind victory up until the votes were counted.

"We are going to surprise!" Netanyahu, head of the Likud party, declared in the town of Bet Shemesh.

The 49-year-old incumbent, in power since 1996, told Likud activists that thousands of voters were "coming home" to his side following the withdrawal on Sunday of minor party candidates.

Opinion polls forecast that Barak, Israel's most decorated soldier, would get between 52 percent and 55 percent of the vote in a contest that has focused largely on character.

However, Netanyahu stunned pundits with a narrow, come-from- behind victory over Labor incumbent Shimon Peres in May 1996 and hoped to do it again. Exit polls in that race showed Peres just ahead when voting ended.

Knesset expected to be fragmented

Voters on Monday also were electing members of the 120-seat Knesset, or parliament, from among 31 contending parties.

Exit poll results predicted that the coalition headed by Barak, One Israel, would hold 33 seats after the election while Netanyahu's Likud party would hold 18 seats.

The Knesset voted to hold early elections after it became clear that Netanyahu lacked parliamentary support for his handling of the peace process with the Palestinians.

Police said they had detained 25 people in 180 election- related incidents, including suspected ballot fraud and fistfights.

Ultra-Orthodox Jews, who uniformly back Netanyahu, clashed Monday with secular activists who were stationed in their neighborhoods to monitor voting. In previous elections, some ultra-Orthodox Jews had been caught using dead people's identity cards to vote more than once.

Security forces also sealed off the West Bank and Gaza Strip, barring entry to Palestinians, for polling day.

Three candidates drop out

The contest narrowed to a two-horse race on Sunday after the last-minute pullouts of Center Party candidate Yitzhak Mordechai , Israeli Arab Azmi Bishara and ultranationalist Benny Begin. .

Their withdrawal dashed Netanyahu's hopes that no candidate would win the required outright majority, giving him a new head of steam for a second-round runoff against Barak on June 1.

Joyful Barak supporters celebrate his victory in Rabin Square in Tel Aviv

Analysts had said Netanyahu's chances lay in a heavy turnout among his core ultra-Orthodox Jewish supporters and hopes that ex-Likud supporters who had backed Mordechai would throw their support behind him.

He also hoped to disprove reports that voters among the 700,000 immigrants from the former Soviet Union -- a key element of his 1996 victory -- have deserted him in droves.

Voting ends personality-driven campaign

Throughout the personality-driven campaign, the one issue that substantially divided the two candidates -- how to revive the peace process -- barely rippled throughout the sometimes vicious campaign.

Netanyahu said the Palestinians must fulfill a long list of demands before he brought Israel back to the table.

He also backed a crisscross pattern of Jewish settlements in the West Bank that would make Palestinian statehood, something he opposes, virtually impossible.

Barak wants Israel to return to its commitments under the Wye River peace agreement brokered by President Clinton last October.

The deal calls on Israel to cede land to the Palestinians in exchange for security measures. Barak also wants to contain Jewish settlements and advocates a separation from the Palestinians.

CNN's Randy Harber contributed to this report.