* Ultra-nationalist minister blasts PM's "Pravda"
* Legislators, free daily face off over values
By Dan Williams
JERUSALEM, March 31 (Reuters) - The planned purchase of a second right-wing Israeli newspaper by a major American backer of Prime Minister Benjamin Netanyahu has some critics seeing a move to shore up his constituency as U.S.-sponsored peace talks with the Palestinians advance.
A Jerusalem court on Sunday approved the bid to buy Makor Rishon ("First Source"), which caters to religious-nationalist Jews including many in West Bank settlements, by Sheldon Adelson, a Republican donor and casino magnate who already owns the free, mass-circulation daily Israel Hayom ("Israel Today").
Israel Hayom says it wants to expand in a newspaper market that, in the Jewish state as elsewhere, has been contracting in the face of cheap digital media. Both Israel Hayom and Makor Rishon say the latter paper will preserve editorial autonomy.
Yet the deal was deplored by Naftali Bennett, a cabinet minister whose ultra-nationalist Jewish Home party is a key member of Netanyahu's conservative coalition government and openly opposes the prospect of a Palestinian statehood accord.
"It saddens me," Bennett told Israel's Army Radio when asked about the Makor Rishon sale, which must still be cleared by anti-trust authorities. "Israel Hayom is Pravda. It is a mouthpiece newspaper for one person - the prime minister."
He cited Israel Hayom's endorsing of Netanyahu policies condemned by many fellow rightists, such as a 2009-2010 partial moratorium on Jewish settlement of occupied land sought by the Palestinians. Washington now wants such curbs renewed to help keep the troubled peace negotiations on track.
"At every juncture when there has been friction between the national interest and the prime minister, the newspaper has always supported the prime minister," said Bennett.
Makor Rishon deputy editor, Uri Elitzur, deemed Bennett's remarks untrue - "an unpleasant slip of the lip" - and said his newspaper would come out against any settlement evacuations.
Hanoch Marmari, a former editor of the liberal Israeli daily Haaretz who blogs on media affairs, suggested Bennett was wary of losing a means of mobilising constituents against Netanyahu.
"If I were Bennett, I would prefer to see Makor Rishon as a paper representing pluralism, rather than one side," Marmari said. "It's possible that this is a chess board and someone is playing the game while looking several steps into the future."
A Jewish Home lawmaker has teamed up with left-wing and centrist counterparts on legislation that would ban free newspapers. These, the bill says, unfairly undermine for-profit papers and pose "significant harm to the freedom of expression".
"In many Western countries, it is acceptable today to grant newspapers economic support so as to guarantee their continued performance, which is essential for democracy," the bill says.
Israel Hayom columnist Gonen Ginat, who often wages wars of words against the daily's detractors and top-selling competitor Yedioth Ahronoth ("Latest Reports"), excoriated the legislation.
"There is no country in which the contest between paid-for and free newspapers is conducted via gagging, care of the legislature. This is an Israeli invention," he wrote.
Yedioth's weekend edition outsells Israel Hayom's by some 43 percent to 31 percent market share. Israel Hayom may narrow the gap by buying Makor Rishon, whose weekend paper has a 4 percent market share. Makor Rishon daily's sales are negligible.
Asked on Army Radio if Makor Rishon, once bought, would censure Netanyahu were he to evacuate West Bank settlements, Elitzur said: "Let's assume that, yes - and if that's not how it is, then my place will no longer be there." (Writing by Dan Williams, Editing by Jeffrey Heller and Tom Heneghan)