Israeli police have evidence which could see Ehud Olmert, the Israeli prime minister, and other Israeli politicians charged with bribery, fraud and breach of trust.

Israeli police from the economic crimes unit have collected enough evidence against Olmert to launch a formal investigation.

The inquiry centres around the privatisation of a prize state asset, Bank Leumi, Israel's second largest bank.

Allegations state that when acting finance minister, Olmert intervened in the wording of the tender to benefit close business associates.

The allegations against the Olmert are the latest in a series of scandals that have convinced ordinary Israelis there is something rotten in the body politic.

Avraham Hirshson, Israel's finance minister, is under police investigation on suspicion of theft, fraud, conspiracy and money laundering.

The prime minister's personal secretary is under house arrest as part of a corruption probe.

The director of Israel's tax authority has suffered a similar fate after an extensive police investigation into officials accepting bribes in return for tax breaks.

Moshe Katsav, Israel's president, is facing allegations of rape and sexual assault, eavesdropping, fraud, breach of trust and improprieties in gift distribution.