National leader John Key has all but ruled out any coalition or support arrangement with New Zealand First following this year's general election.
Today a letter written by billionaire Owen Glenn was released, saying Mr Peters solicited and then thanked him for a $100,000 donation. Mr Peters has said he only learned of the donation a few weeks ago. He says Mr Glenn's version of events is wrong.
Mr Key said unless Mr Peters could provide a credible explanation he would be unacceptable in a government he led.
Asked if he would negotiate with Mr Peters after the election towards a support arrangement or coalition, he said: "I am ruling out Mr Peters. He simply doesn't have the integrity in my view unless he can somehow change that."
Mr Key said Prime Minister Helen Clark should stand down her foreign affairs, associate senior citizens and racing minister.
"Mr Glenn's letter represents a direct challenge to Mr Peters' credibility from the only person in the world in a position to know the facts," Mr Key said.
Mr Key accepted there was an "extremely low" likelihood Mr Peters could give a credible explanation.
"The bottom line here is that Mr Glenn has in writing put a very clear and direct statement. Mr Peters has failed at this point to refute that and would have to provide clear and direct evidence that Mr Glenn has got it wrong. You have to say what motive has Mr Glenn got for misleading the privileges committee?"
Asked if Mr Peters had a motive: "You'd have to say on the balance of things, yes."
Parliament's privileges committee is looking into the donation issue but Mr Key decided not to wait for its outcome before announcing his position.
"As far as I am concerned there comes a point where enough is enough."
He was unimpressed with NZ First MP Dail Jones casting doubt on the veracity of Mr Glenn's letter because it was unsigned and not on letterhead and with Mr Peters' argument there was no fraud involved.
"Well that's not the point. In the early part of this year Mr Peters held a press conference where he held up a statement and said at no time had he been involved in solicitation or receipt of $100,000 donation. That according to Mr Glenn is factually incorrect."
Ministers had to have Parliament's and the public's confidence.
"Faced with today's revelations it is no longer acceptable for Mr Peters to offer bluster and insults where simple courteous honest answers are required.
"Faced with today's revelations, Helen Clark must stand Mr Peters down as a minister. That's what I would do if I were the Prime Minister."
He said Miss Clark has stood other ministers down for less.
Deputy Prime Minister Michael Cullen said Mr Key was trying to look tough but had not given a decisive position.
"Helen Clark has made it clear that she is waiting on the outcome of the privileges committee who will examine the conflicting evidence presented to it today."
