Israel's opposition leader Benjamin Netanyahu has turned down Foreign Minister Tzipi Livni's call to join her cabinet while her main coalition partner Labour kept her guessing about their intentions.
Livni, who faces a daunting struggle to build a workable parliamentary majority, was asked by Israel's President Shimon Peres on Monday to form a new government in the wake of Prime Minister Ehud Olmert's resignation over a corruption scandal.
Livni said on Monday she would aim for a broad coalition that would include Netanyahu's right-wing opposition party Likud.
"The responsible, democratic and correct thing to do is to set an agreeable date for elections and let the people decide who will lead them and in what way," Netanyahu said in a televised news conference.
Opinion polls show Likud would likely win a general election before the next scheduled vote in 2010. Labour Party leader Ehud Barak called Netanyahu's decision a "missed opportunity" and pledged to continue their partnership with Livni's centrist Kadima party but said Labour may still seek early elections.
"We will exhaust all possibilities to bring to a stable government with a real ability to function. If we will be able to reach a true partnership, we will do so willingly. If not -- we are not afraid of going towards elections," Barak said.
Livni, who by law has six weeks to present a cabinet to parliament, said she would propose an election if she failed to gather enough of Israel's 13 parliamentary blocs behind her administration.
Olmert resigned as prime minister on Sunday, but will remain in office as caretaker premier until the next government is in place, either through political negotiations or an election.
The political uncertainty has further dimmed prospects of an Israeli-Palestinian peace deal, which the United States had hoped Olmert and Palestinian President Mahmoud Abbas could achieve this year.
Livni met with chief Palestinian negotiator Ahmed Qurie on Tuesday who said the Israeli minister assured him peace talks will not stall while she tries to form a new government.
Israeli officials confirmed the meeting had taken place but denied Livni made any promises about the contents of the negotiations going forward. Some prospective coalition partners object to including Jerusalem in the talks.
Olmert, who could face criminal indictment in corruption probes, was replaced as Kadima chairman by Livni in an internal election on Wednesday in which she narrowly defeated her main challenger, Transport Minister Shaul Mofaz.
If Livni forms a coalition, she will become Israel's first woman prime minister since Golda Meir in the 1970s.