CANBERRA Australian Foreign Minister Kevin Rudd resigned on Wednesday, saying he could no longer work with Prime Minister Julia Gillard, igniting a new and bitter leadership crisis for the struggling minority government.
Gillard's government has sunk in popularity as Gillard and Rudd, whom she ousted in 2010, have waged a personal feud that has split their Labor Party and alienated voters.
Labor insiders said that while Rudd was more popular with voters, Gillard had stronger support within the party and would easily win a leadership vote, which could come as early as next week.
They differ little on policy, but the battle -- described by Rudd as a "soap opera" -- threatens to trigger an early election and a defeat for Labor's economic reform agenda, including major mining and climate change legislation.
Senior ministers had in the past week urged Gillard to sack Rudd due to the leadership speculation and increasing animosity between the two camps.
"The simple truth is I cannot continue to serve as foreign minister if I do not have Prime Minister Gillard's support," Rudd told a news conference in Washington. "The only honourable course of action is for me to resign."
Rudd's supporters believe only he can stem haemorrhaging voter support to opposition leader Tony Abbott and his conservative coalition, which holds a strong lead in opinion polls. But a move back to Rudd risks losing the backing of independents who give the minority Labor government a one-seat majority.
"I am disappointed that the concerns Mr Rudd has publicly expressed this evening were never personally raised with me, nor did he contact me to discuss his resignation prior to his decision," Gillard said in a brief statement.
Deputy Prime Minister and Treasurer Wayne Swan was more critical, issuing a scathing attack on Rudd, accusing him of disloyalty and of undermining the government.
"The party has given Kevin Rudd all the opportunities in the world and he wasted them with his dysfunctional decision making and his deeply demeaning attitude towards other people, including our caucus colleagues," Swan said.
Analysts said a change of leader would cause upheaval in the caucus, including likely changes in key positions such as treasurer and defence minister, but have little impact on policy or the outcome of the election.
"If Rudd were to wrest the leadership, I think we'd be headed certainly to a 2012 election," Australian National University Political analyst Norman Abjorensen told Reuters.
"A Rudd government would look very different from a Gillard government, and would presumably be fairly short lived."
Rudd, who will return at least temporarily to the backbenches after quitting cabinet, told the news conference he would return to Australia this week before deciding his future.
"There is one overriding question for my caucus colleagues and that is who is best placed to defeat Tony Abbott at the next election," said Rudd, a Mandarin-speaking former diplomat.
Opposition to a 40 percent tax on mining profits introduced by Rudd contributed to his demise as prime minister.
Gillard overthrew him in a party room coup and immediately cut the tax rate to 30 percent while excluding all but the country's most profitable iron ore and coal miners.
Abbott has said that if he wins the next election, he will dump both the planned mining tax and plans to introduce a carbon price to combat climate change, both due to come into force on July 1.
The instability was damaging the country and the government was unworthy of staying in power, he said on Wednesday.
"Kevin Rudd has confirmed two things - that the faceless men are running the Labor Party and that the instability at the top of this government is damaging our country," Abbott said in a statement.
Rudd's backers saying he remains more popular with voters and would help revive party support ahead of the next election, due in late 2013.
But he is not as well liked within the Labor Party and he alienated may colleagues with his imperious style when he was prime minister.
"The overwhelming support within the parliamentary party is for the prime minister, is for the government. It is overwhelming, it always has been," Environment Minister Tony Burke told Australian television.
Weeks of leadership instability has undermined Labor's chances of holding power in the state of Queensland at a March 24 poll -- the resource-rich state is also crucial for the national government's re-election.
"I think the dislike of the current government is quite deep. It goes beyond the leaders, which is part of their problem," said John Stirton from pollster AC Nielsen.
"They would get a short-term boost from Rudd, but I don't think it is going to solve their problems."
(Additional reporting by Lincoln Feast, James Regan, Maggie Lu-Yueyang and Michael Perry; Editing by Nick Macfie)