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Key party turns down Livni offer Key Israel party spurns coalition
(about 2 hours later)
The Shas party, a key player in Israeli coalition talks, has said it will not back Foreign Minister Tzipi Livni. The religious Shas party says it will not join the coalition Tzipi Livni is trying to form, in a major setback for the would-be Israeli Prime Minister.
Ms Livni, head of the largest party, Kadima, said on Thursday Israel would face elections if a government was not formed by Sunday. Ms Livni, head of Kadima, the largest party, said on Thursday Israel would face elections if she had not formed a government by Sunday.
She has the support of the Labour party but is still short of a majority.She has the support of the Labour party but is still short of a majority.
Correspondents say Shas's decision is a major setback for Ms Livni. She may still be able to form a government, but it will be considered weak. Correspondents say the move is a blow to Ms Livni, but she may still be able to form a minority government.
After intense negotiations, the ultra-orthodox Shas party said the party was unable to reach agreement with Kadima over the status of Jerusalem and social welfare benefits. The ultra-orthodox Shas party said it had decided not to continue negotiations with Kadima, after the parties were unable agree on the status of Jerusalem and welfare benefits.
"Shas has asked only for two things... real financial help for the (financially) weak in Israeli society and and protection for Jerusalem... which is not merchandise for sale," a party spokesman said, according to Reuters news agency. A party spokesman told Reuters news agency that Shas had asked for only two things, "real financial help for the weak in Israeli society and protection for Jerusalem... which is not merchandise for sale".
Ms Livni is committed to continuing peace negotiatons with the Palestinians, but Shas is opposed to a government willing to discuss the status of Jerusalem. Kingmaker party
Ms Livni, currently Israel's foreign minister, is committed to continuing peace negotiations with Palestinians, but Shas is opposed to discussions on the status of Jerusalem.
The Palestinians have demanded that east Jerusalem - occupied by Israel since 1967 - should be the capital of a future Palestinian state, while Israelis consider the city their own "eternal, undivided" capital.
Ms Livni's deal with Labour gives her a total of 48 seats in the 120-member Knesset.Ms Livni's deal with Labour gives her a total of 48 seats in the 120-member Knesset.
She could still form a government if she can secure the support of left-wing Meretz and the Pensioners Party. With 12 seats, Shas is currently the third-largest party and has often played the role of kingmaker in Israeli politics.
Ms Livni could still form a minority government with left-wing Meretz and the Pensioners Party - although talks with the latter are reported to be stalled.
She has another 10 days to continue coalition building. But she has said she will announce on Sunday whether she has been successful, in what is widely seen as an ultimatum to potential partners.
If she is unable to form a government, President Shimon Peres may ask another MP to try to do so, or call elections.
Ms Livni was voted head of Kadima after former Prime Minister Ehud Olmert said he would step down in the face of multiple corruption investigations.
Polls suggest the opposition Likud party, led by Binyamin Netanyahu would gain most seats in a general election.