JERUSALEM (Reuters) - Israel’s attorney-general ordered police on Monday to open a criminal investigation into Prime Minister Ehud Olmert’s purchase of a home in Jerusalem.

Israel's Prime Minister Ehud Olmert attends the Foreign affairs and defence committee meeting in Jerusalem September 24, 2007. REUTERS/Yonathan Weitzman

A complaint filed by an investigative journalist alleged Olmert received a “significant discount” on the price in return for using his influence in Jerusalem city hall to speed up building permits for the contractor who sold him the home.

Olmert denied any wrongdoing in the case, one of several corruption probes that have plagued the Israeli leader since he took office last year and raised questions about his political future as he pursues peace talks with the Palestinians.

“The attorney-general decided to order police to open a criminal investigation into the Cremieux affair,” the Justice Ministry said, referring to the street where Olmert bought the house for $1.2 million in 2004.

Israeli media reports said $320,000 was knocked off the purchase price.

Olmert served as mayor of Jerusalem from 1993 to 2003.

Israel’s main government watchdog, the state comptroller’s office, first investigated the complaint and gave its findings to Attorney-General Menachem Mazuz.

“This is a needless investigation,” said a statement issued by the Prime Minister’s Office after Mazuz ordered the police probe. The price Olmert paid for the home, it said, was in line with real estate market conditions at the time.

“The prime minister will cooperate fully with the investigation in order to bring it to as swift a conclusion as possible,” the statement said.

BANK PROBE

Police are already investigating Olmert’s role, as finance minister, in the 2005 privatization of Bank Leumi, Israel’s second biggest commercial bank.

Suspicions in that case focus on whether Olmert tried to tailor the sale offer to give preference to a friend, who ultimately never bid on the bank. Olmert has denied any wrongdoing and he is expected to be questioned by police soon.

Mazuz is also considering whether to instruct police to investigate whether Olmert, as industry and trade minister in 2003, appointed cronies to a government-funded business authority and helped secure official funding for a factory represented by his former law partner.

Olmert has said the suspicions are baseless.

The Israeli leader, whose popularity ratings plunged to single digits after last year’s Lebanon war, faces another possible blow when a government-appointed committee investigating the conflict files its final report.

The Winograd commission, in interim findings in April, said Olmert acted hastily in ordering the war against Hezbollah guerrillas after the Lebanese fighters abducted two Israeli soldiers in a cross-border raid in July 2006.

No date has been set for publication of the final report.