JERUSALEM, ISRAEL - ISRAELI Prime Minister Ehud Olmert admitted that he took cash from an American businessman but refused to resign over a police investigation into hundreds of thousands of dollars of alleged bribes.

As most Israelis enjoyed parties marking Independence Day and the 60th anniversary of the founding of their state, police lifted a media gag order on the probe and announced details of accusations that will increase pressure on Mr Olmert to quit.

Whether he does or not, doubt over his future is likely to upset his faltering peace negotiations with the Palestinians and will cast a heavy cloud over next week's celebratory visit to Israel by United States President George W. Bush.

In a hastily arranged, late-night, televised statement to journalists at his Jerusalem residence, Mr Olmert said: 'I never took bribes. I never took a penny for myself.

'I was elected by you, the citizens of Israel, to be prime minister. I do not intend to shrug off this responsibility.

'However, although not required by law, if the attorney general decides to file an indictment against me, I will resign.'

In a terse six-minute address on Thursday, Mr Olmert confirmed he had taken money from Mr Morris Talansky, a New York-based financier also known as Moshe Talansky. But he insisted that these were simply donations to fund campaigns for re-election as mayor of Jerusalem and for the leadership of the Likud party.

Mr Olmert took no questions after his statement.

Just minutes earlier, police said in a statement: 'The investigation deals with suspicions that the prime minister received significant sums of money from a foreigner or number of foreign individuals over an extended period of time.'

A police spokesman named Mr Talansky as a key witness, along with Mr Olmert's long-time secretary Shula Zaken and his former law partner Uri Messer. He said the investigation was probing the period from 1998, when Mr Olmert was running for re-election as mayor, to 2006, when he became prime minister.

A judicial source said that the sums involved totalled hundreds of thousands of dollars. -- REUTERS