Jerusalem - Israeli hawk Benjamin Netanyahu failed to convince centrist rival Tzipi Livni to join him in a broad governing coalition on Sunday because of their divergent views on the Middle East peace process.

Foreign Minister and Kadima party leader Tzipi Livni is seen on a rotating billboard with Likud party leader Binyamin Netanyahu. (Photograph: Tara Todras-Whitehill / AP)

    "We didn't reach any agreement," Livni told reporters after their meeting in Jerusalem. "There is an essential divergence and we have to clarify if there is a possible common path. We didn't make progress on any essential subjects."

    "On the essential subject for arriving at a (coalition) agreement - that there should be two states for two peoples and a final accord with the Palestinians - there is no agreement."

    Netanyahu appeared more optimistic. "We found many common points that require further meetings. We are trying to find a common path," he said.

    As foreign minister Livni has led peace talks with the Palestinians since 2007 that have shown little sign of progress, while Netanyahu has said he would focus on improving the economy in the occupied West Bank before negotiating a comprehensive solution to the decades-old conflict.

    Netanyahu is thought to favour a broad alliance over a right-wing coalition that would be unlikely to last a full term and would put Israel at odds with US President Barack Obama, who has vowed to vigorously pursue peace talks.

    "Aware of the enormous challenges faced by the country, there is no doubt that forming a union should be our foremost goal," he said earlier Sunday.

    "I expect a coalition government that will cooperate with the Obama administration," said Netanyahu, who was tasked with forming a government despite his Likud party coming second in the February 10 election.

    The former prime minister had planned to entice Livni with the offer of senior posts in the future government, including the foreign and defence portfolios, local media reported.

    But Livni has warned she will have nothing to do with a right-wing coalition and, at a Kadima party meeting ahead of her talks with Netanyahu, she said that to enter such an alliance would be a "fraud before the electorate."

    Local media have reported, however, that she is under pressure to join the government from within her own party, which won 28 seats to Likud's 27.

    The 59-year-old Netanyahu was formally charged by President Shimon Peres on Friday with forming the new government. He has up to six weeks, or April 3, to put together a coalition.

    He can in theory count on the support of 65 MPs from various right-wing parties in the 120-member Knesset, but analysts say he wants to form a broader grouping that would be more stable.

    Netanyahu headed a right-wing government when he became Israel's youngest prime minister in 1996, but it fell apart three years later when small far-right parties quit in protest over deals he struck with the Palestinians under US pressure.

    Netanyahu had agreed to hand over control of parts of the West Bank city of Hebron to the Palestinians. But he also put the brakes on the peace process, in part by authorising an expansion of Jewish settlements in the territory.

    Israel's system of proportional representation usually forces premiers to secure coalition partners among the myriad of smaller parties, resulting in governments that are notoriously unstable.

    The February election was called a year ahead of time after Livni failed to form a cabinet following the resignation of scandal-plagued outgoing Prime Minister Ehud Olmert.

    The ultra-Orthodox Shas party had refused to join a Livni cabinet because of her willingness to negotiate the status of Jerusalem with the Palestinians, scuttling her first attempt to become Israel's second woman prime minister.

    A right-wing Netanyahu government is likely to put Israel at odds with its main ally the United States, where Obama has vowed to pursue peace talks and has put together an experienced team to focus on the issue.

    Netanyahu faces a delicate balancing act as he tries to entice Livni into his government without alienating religious and far-right parties on whom he will have to rely should Kadima go into opposition.

    "He comes to this match already married," wrote the Maariv newspaper. "If he should say yes to Livni, he will lose his natural base. He cannot say yes to her. He can say 'perhaps.' Or 'We will see.' He can nod silently. He can wink."

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