Jerusalem - Prime Minister-designate Binyamin Netanyahu on Friday failed a second time to win Foreign Minister Tzipi Livni's agreement to join a government of national unity, increasing the likelihood that Israel will be led by a narrow coalition of parties opposed to or skeptical of talks with the Palestinians.

Israeli Kadima party leader Tzipi Livni meets with Israeli Likud leader Benjamin Netanyahu. (Photo: Getty Images)

    After meeting with Livni, Netanyahu told reporters that he had offered her centrist Kadima party full partnership in the government and two of the three top cabinet posts - foreign minister, defense minister and finance minister - but that she turned him down.

    "It is clear that unity requires compromise and taking steps toward one another," said a clearly disappointed Netanyahu, leader of the Likud party. "I was prepared to go a very long way for the sake of unity."

    Livni said the meeting ended without agreement on "fundamental" issues, including how to proceed with negotiations with the Palestinians toward an independent Palestinian state.

    "A two-state solution is not simply a hollow slogan - it is the only way in which Israel can remain a democratic, Jewish state, and it is the only way in which it can enlist an international coalition that will allow it to act and to confront the Iranian threat and terrorism," she said."

    Neither side closed the door completely on a unity government, but there was no announcement of another round of talks, and Netanyahu said he will speed up coalition negotiations with smaller hard-line and ultra-Orthodox parties beginning Sunday. He still has a month to form a government but has said he would like to complete the process as quickly as possible.

    Israel Radio quoted "associates" of Livni's as saying that once Netanyahu decided not to agree to a government in which she and he would rotate as prime minister, she decided to go into the opposition. For his part, Netanyahu appeared to want to show he was making every effort to form a unity government, which polls indicate would have strong public support.

    Netanyahu told Livni he plans to advance the peace process with the Palestinians, but he has also said he favors an "economic peace," a series of measures meant to improve daily life for the Palestinians and help to build their economy.

    A narrow right-wing government could spark tensions with the Obama administration, which has said a solution to the Israeli-Palestinian conflict is high on its agenda. Secretary of State Hillary Rodham Clinton is to arrive in the region this weekend for a donors conference on rebuilding the Gaza Strip after the recent fighting between Israel and Hamas. She will also visit Jerusalem and Ramallah, in the West Bank, and meet with Israeli and Palestinian leaders.

    The National Union, a hard-line faction with four seats in parliament, has said it will join the coalition only if Netanyahu agrees to expand Jewish settlements in the West Bank and legalize dozens of unauthorized settler outposts.

    The Haaretz newspaper reported Friday that Israel's military government in the West Bank has a plan to build thousands of new apartments in the Gush Etzion settlement bloc near Bethlehem. The plan has not been officially approved, Haaretz said.

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