A Knesset (Israeli parliament) report released Sunday criticized the Israel Defense Forces'(IDF) Military Intelligence branch and the Mossad for their lack of an accurate assessment of dangers posed by both Libya and Saddam Hussein's regime in Iraq.

The report, compiled by a special investigation panel of the Knesset subcommittee supervising Israel's secret services, slams the intelligence services for failing to discover whether Iraq possessed weapons of mass destruction (WMD) and to recognize Libya was in the advanced stages of developing its nuclear capability.

The committee, headed by Knesset Foreign Affairs and Defense Committee Chairman Yuval Steinitz, said this was a "serious intelligence failure that must lead to housecleaning and reorganization."

On the issue of Iraqi WMD, the report said, "It could be that these weapons could yet be uncovered, but it remains a significant gap between intelligence assessment that this weaponry existed and they are ready to be fired."

It recommended the structure of the intelligence community could be changed in such ways as removing intelligence-gathering unit " 8200" from Military Intelligence auspices and transforming it into an independent national intelligence agency.

Sources close to the panel claimed it has concluded that intelligence officials issued mistaken assessments of Iraqi WMD.

The panel, however, said Israel's intelligence officials did not make a fundamental error in assessments on Iraq, so it did not recommend that any official be censured or removed.

While an 80-page public report is to be released, the investigation committee's main findings and conclusions are to be relayed in a classified section of the document.

This classified section with graphs and tables will be finished in a few weeks, and submitted to Prime Minister Ariel Sharon, Defense Minister Shaul Mofaz, and IDF Chief of Staff Moshe Ya'alon.

The investigation committee held 50 meetings over an eight-month period, and heard testimony from 70 witnesses, including Sharon, Mofaz, Ya'alo and the heads of the Mossad, Military Intelligence as well as the Shin Bet security service (General Security Service).

The panel considered a number of issues, including what intelligence officials knew about Iraq's ability to fire conventional or non-conventional missiles at Israel, the nature of intelligence cooperation between Israel and friendly nations and whether the decision to order citizens to open gas masks was warranted.