Key witness in Israel corruption case arrested after reneging on deal

A key witness in a high-profile corruption case implicating allies of Israeli Prime Minister Benjamin Netanyahu has been arrested after backing out of a deal to testify for the state, police said Wednesday.

Michael Ganor was arrested on Tuesday after informing police of his intention to "change the version he gave during the investigation" into corruption suspicions around the purchase of submarines from Germany's ThyssenKrupp for Israel's navy, police said.

Ganor was taken to court on Wednesday, where his remand was extended until Sunday.

Police said in November there was evidence to press charges against a number of suspects, including Netanyahu's cousin and lawyer David Shimron.

Netanyahu was questioned as a witness in the case and was not considered a suspect.

Ganor, who had been ThyssenKrupp's local representative, had agreed to turn state's witness in return for serving a 12-month prison sentence for tax offences and paying a heavy fine.

His change of heart came shortly after reports that Netanyahu had sold stock in a company that supplied services to ThyssenKrupp.

Benny Gantz, Netanyahu's main challenger in the April 9 election, alleged the premier had gained 16 million shekels ($4.4 million) from his stock that rose due to a deal to buy an unnecessary submarine.

On Wednesday, Netanyahu accused Gantz and his Blue and White running partner Yair Lapid of "forcefully trying to resuscitate" the submarine affair, despite it having already been investigated by police because of their "panic" over recent developments in the electoral campaign.

Netanyahu is locked in a close battle with the centrist Blue and White political alliance while under threat of indictment for corruption in separate cases.

In his comments on Wednesday, the premier referred to Gantz's phone having been hacked, allegedly by Iranian intelligence, a story that has made headlines in recent days.

Netanyahu has made the phone hack a key part of his campaign against Gantz, suggesting his opponent could be blackmailed by Israel's main enemy if he were to become prime minister.

Gantz says there was nothing sensitive on the phone and has suggested Netanyahu's camp was behind leaks that led to stories about the hack that he was informed about months ago.

"This is not gossip, it's a matter of the security of the state," Netanyahu said.