(Correcting Gantz quote in paragraph 8)
* Budget dispute triggers Israel's fourth election in two years
* Netanyahu faces new right-wing challenger
* Israeli leader faces public anger in COVID-19 crisis
* Outgoing government took office in May
By Jeffrey Heller
JERUSALEM, Dec 22 (Reuters) - Israel will hold a snap election in March after parliament failed on Tuesday to meet a deadline to pass a budget, triggering a ballot presenting new challenges for Prime Minister Benjamin Netanyahu.
Campaigning in Israel's fourth parliamentary election in two years gets underway with Netanyahu facing public anger over his handling of the coronavirus pandemic and while he is engaged in a corruption trial, the first against an Israeli prime minister.
Israel's longest-serving leader will also have to contend with a new rival from the right, Gideon Saar, a defector from Netanyahu's Likud party. An opinion poll on Israel's Kan public TV on Tuesday showed Saar drawing even with the prime minister.
Netanyahu, who has denied any criminal wrongdoing, and the current defence minister, centrist politician Benny Gantz, established a unity government in May after three inconclusive elections held since April 2019.
But they have been locked in a dispute over passage of a national budget, key to implementing a deal in which Gantz was to have taken over from Netanyahu in November 2021. A new election means that "rotation" will never happen.
Some political analysts said Netanyahu had hoped to use the budget dispute to force an election that would get him out of the power-sharing deal with Gantz. But they said he had preferred a ballot in May or June, when a vaccination campaign now underway could bring him more voters.
"If an election is forced upon us, I promise you that we will win," Netanyahu said in a televised speech on Tuesday, blaming Gantz - who has plunged in the polls - for the early ballot.
"Netanyahu is taking us to an election for the sole purpose of not entering the courtroom," Gantz wrote on Twitter, alleging that Netanyahu hoped for a new government to promote legislation quashing legal proceedings against him.
Netanyahu will remain prime minister until a new government is formed after the March election. Now 71, he first served in the post from 1996 to 1999 and has held the office since 2009.
In his TV address, and effectively kicking off his campaign, Netanyahu said he had arranged for millions of doses of coronavirus vaccine to be delivered to Israel. He also hailed U.S.-brokered diplomatic deals with the United Arab Emirates, Bahrain, Sudan and Morocco.
Netanyahu enjoyed a close relationship with President Donald Trump, who made a number of pro-Israel moves during the previous elections. But with U.S. President-elect Joe Biden set to take office in January, Netanyahu will lose a major campaign asset, said Reuven Hazan, a political scientist at Jerusalem's Hebrew University.
(Additional reporting by Maayan Lubell; Editing by Dan Grebler)
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