Israel took its first steps towards forming a new government Monday widely expected to be led by interim Prime Minister Ehud Olmert, who wants to set the country's final borders with or without Palestinian agreement.

President Moshe Katsav, who will choose a party leader to put together a governing coalition, first met members of Olmert's centrist Kadima party, which won the most parliamentary seats in the March 28 election.

He then held talks with the center-left Labor Party, which came second.

Discussions with all parties that won seats are likely to last several days.

Katsav said he would try to choose a candidate quickly to begin the task of forming a government. Kadima, which fared worse in the elections than predicted, said it wanted to build a broad coalition. It took 29 seats in the 120-member parliament.

Labor is expected to join a Kadima-led coalition, although a sticking point could be who will get the vital post of finance minister, a job Labor sees as vital to its social program.

"A wide government will provide stability to enable the government to make decisions, stand by them ... and fulfill its full term," senior Kadima official Roni Bar-On said.

"The 'convergence plan' will be an inseparable part of the government's guidelines," Bar-On said, referring to Olmert's proposal to remove settlers from swathes of the occupied West Bank if peacemaking with the Palestinians stays frozen.

Israel would keep major settlement blocs under the plan and trace a border along a barrier it is building in the West Bank, where 240,000 Israelis live among 2.4 million Palestinians.

Palestinians condemn such a move, saying it would annex land and deny the viable state they seek in the West Bank and Gaza Strip, which Israel captured in the 1967 Middle East war.

'Brave decisions'

A new Palestinian government led by the Islamic militant group Hamas took office last week, vowing to continue fighting Israel. Hamas is sworn to the Jewish state's destruction.

Hamas Prime Minister Ismail Haniyeh said any talks with Israel would depend on the Jewish state. which refuses to negotiate with Hamas.

"What is important for us ... is there be brave decisions on the legitimate rights of the Palestinian people and on ending the decades-long occupation and suffering," Haniyeh said.

Besides Labor, which won 20 seats, parties expected to join Olmert's government are the Pensioners Party with seven seats, and two ultra-Orthodox Jewish factions, Shas, with 12 and United Torah Judaism with six seats.

Most can be counted on to support a West Bank withdrawal.

Labor chief Amir Peretz focused his election campaign on raising minimum wages and increasing spending on welfare, spurring his party to seek the finance minister's portfolio.

Kadima has ruled that out while Israeli media have reported Peretz was refusing to meet Olmert over the issue.

Labor Secretary-General Eitan Cabel said the party wanted the post to fight problems such as growing poverty.

Kadima has sought to play down any tension.

"Olmert has invited Peretz (for talks) and there is no reason he will not be part of the coalition," another Kadima official, Dalia Itzik, said.

A candidate chosen by Katsav will have up to 42 days to form a government.

(China Daily April 3, 2006)