Representatives from Israel's two largest political parties initialed a draft coalition agreement Monday afternoon, the first such deal in Foreign Minister Tzipi Livni's attempt to form a new government, reported dpa.
Livni, who heads the Kadima Party, and Labour Party leader Ehud Barak will sign the agreement themselves after the Tabernacles holiday, which ends in Israel on Tuesday night.
Israel Radio reported that two issues still outstanding from the Kadima-Labour negotiations will also be finalised after the holiday.
Details of the deal were not immediately available, but it is understood that the Labour Party under Barak will become the Kadima's senior coalition partner.
Barak had also demanded that he be a "full partner" in running the government, and be involved in talks Israel is holding with the Syrians and the Palestinians.
President Shimon Peres charged newly-elected Kadima leader Livni on September 22 with forming a government, to replace that headed by Ehud Olmert, who quit the premiership on September 21, because of his alleged involvement in corruption scandals under investigation by the police.
Livni however will have to woo more parties to her side, as the Labour Party's 19 Knesset seats, coupled with Kadima's 29 seats, does not give her the minimum 61 mandates needed to form a majority coalition.
Under Israel law, Livni has 28 days from the time the president nominated her, to from a government. She can ask for a 14 day extension, but if she is still unable to set up a coalition, new elections must be held within 90 days.