When Defense Minister Amir Peretz stood up at the weekly cabinet meeting on Tuesday, leaned forward on the table, raised his hand and yelled at Prime Minister Ehud Olmert, the shouting was heard in the corridor outside the cabinet room. When State Comptroller Micha Lindenstrauss appeared that same day before the Knesset State Control Committee and publicly chastised the prime minister for dragging his feet in responding to his post-war probe, his "audacity" was duly registered by those in Olmert's office. But Peretz's yelling and Lindenstrauss' audacity were also heard, seen and noted in Washington and Brussels, in Cairo, Riyadh and Ramallah. And all this is not, as Olmert's office might have us believe, without significance. With Olmert set to meet again with Palestinian Authority Chairman Mahmoud Abbas this week, and with the Arab League to hold a key summit later this month in Riyadh, the perception of weakness pounded home this week by Peretz's outburst and Lindenstrauss' testimony does matter. First of all, why - senior diplomatic officials said - should leaders of the world take Olmert seriously when his own ministers and government bureaucracy are incessantly dumping on him? Why should they treat him or his government with any more respect than they do? And respect matters in diplomacy. Ariel Sharon, for instance, had no small stable of detractors. Yet when he was prime minister, no one would have dared speak to him in the manner in which Peretz spoke to Olmert. Sharon covered himself in the mantle of the elder of the tribe, and this aura radiated to both his opponents and his interlocutors abroad. Secondly, Olmert's weakness is important diplomatically because it may force him to extremes. Some officials in Jerusalem speculated that Olmert's current political woes could conceivably push him either to make extreme concessions to the Palestinians or to take extreme military actions, amid a feeling that either he will continue to be plagued by the current paralysis or push forward with something so dramatic that it will distract attention. The danger in the current domestic situation Olmert faces - his popularity is at an all-time low and the political vultures are circling above - is that it could create a sense of I-am-doomed-if-I-don't-do-something-dramatic. Or, as the popular slogan went in the run up to the disengagement from Gaza and the investigations that were dogging Sharon: "The extent of the withdrawal is dependent on the extent of the investigation." As to the extremes, Olmert could be pushed into a massive military response in Gaza at the next major provocation - a Kassam missile that doesn't only harm property, but also kills people, or another kidnapping. In the other direction, he could be pushed into making major concessions, thinking this is the only way out of his domestic dilemma. This later option, one official said, was more likely, since Olmert would be unlikely to repeat last summer's decision, now under investigation by the Winograd Committee, to go to war over the kidnapping of two soldiers. WHEN OLMERT sits down with Abbas next week, this time he will need the meeting no less than the Palestinian leader. Abbas needs the meeting because he would like to pry gestures from Olmert while he is still negotiating with Hamas over a unity government, to prove that in the end he can deliver goods from the Israelis. Olmert needs the meeting to show the public that he is acting prime ministerial, that there is diplomatic movement and that he is doing more than just trying to extricate his leg from the biting dogs nipping at his heel. After a frightful week of taking domestic blows from annoying ministers and retired judges, the sit-down with Abbas will give Olmert the chance to look prime ministerial, to deal once again with the big issues, not the small stuff sapping his time and energy. And not only are the big issues not going away, two are looming large and immediate. The first is the need to keep Europe on board regarding its commitment to the three benchmarks a PA government will need to meet before gaining international legitimacy: recognizing Israel, renouncing violence and accepting previous agreements. And the second issue revolves around the Arab League summit in Riyadh on March 28, and the expectation that the Saudis will "relaunch" the Beirut initiative from 2002. Regarding the three criteria, Israel is increasingly concerned by an erosion of support in Europe, and is worried that once a PA unity government is formed, there will be more forceful calls in Europe to deal with it, or at the very least to deal with the non-Hamas ministers inside it. When Foreign Minister Tzipi Livni was in Brussels this week, some of her counterparts told her bluntly that Israel should not be ridiculous and say, for instance, that Salaam Fayad - who everyone considered a fine fellow a few weeks ago - would have to be shunned once he became the finance minister in a PA unity government. Israel is continuing to benefit from the fact that Germany currently holds the rotating presidency of the EU and is not budging regarding the three conditions. But this will not go on forever, and Portugal - which lacks Germany's pro-Israel orientation - takes over the reins in July. Already Italy, Spain and France are working inside the EU to get it to "show more flexibility" in the matter. Israel is anticipating an erosion in the EU position, though it continues to struggle diplomatically to prevent it. The other big issue on the agenda that Olmert will have to deal with is the Arab League summit and the likelihood that it will relaunch the Beirut refugees-and-land-for peace initiative of 2002. Under this initiative, a variation of the original Saudi initiative of that year, Israel would completely return to the pre-1967 lines, including in Jerusalem and on the Golan, and a Palestinian state would be created with east Jerusalem as its capital in exchange for "the establishment of normal relations in the context of a comprehensive peace." This resolution also called for the "achievement of a just solution to the Palestinian refugee problem to be agreed upon in accordance with UN Resolution 194." That resolution, adopted in December 1948, stated that "the refugees wishing to return to their homes and live at peace with their neighbors should be permitted to do so at the earliest practicable date, and that compensation should be paid for the property of those choosing not to return and for loss of or damage to property." Last week, Livni made it clear that Israel could not accept this initiative if it included the article on refugees, repeating Israel's argument that this would demographically undermine Israel as a Jewish state. The very fact that she said this, according to one Foreign Ministry official, all but ensured that the Arab League would not omit the offending article, not wanting to appear to be doing Israel's bidding. Both Arab League Secretary-General Amr Moussa and the Syrians made this clear this week, and such an initiative would need a consensus of the organization's 22 members - including "Palestine" - to pass. Nevertheless, the initiative will place Israel on the horns of a diplomatic dilemma. If the Arab League once again accepts the initiative, Hamas will have to accept it, which will lead to calls in the international community for Jerusalem to stop its boycott of the PA, the argument being that by accepting the initiative Hamas has implicitly accepted the three conditions. OLMERT'S RESPONSE to this initiative and the likely ensuing international pressure will be critical and will set the tone of diplomatic process for months to come. It is also a response that it is hard to believe will be divorced from the influence Lindenstrauss, Peretz and the horrible opinion polls are having on the prime minister. In a perfect world, or even in a regular world, leaders need a "comfort zone" in which they can make critical decisions without being overly swayed by other considerations. But with Peretz shouting at him, Lindenstrauss continuously nagging him, the Winograd Committee findings right around the corner and opinion polls showing that only 2 percent of the population actually trusts him, Olmert doesn't have such a comfort zone. This is well worth keeping in mind considering the critical decisions he faces just ahead.