Early elections in Israel are becoming increasingly likely, after the ultra-Orthodox Shas party announced Friday that it would not join a coalition led by Foreign Minister Tzipi Livni, reported dpa.
Shas' decision, which came after Livni issued an ultimatum late Thursday, dealt a serious blow to her efforts to form a government by early next week.
Livni said Shas had until Sunday to accept her final offer and join a government led by her.
She said she would announce to Israeli President Shimon Peres by then whether she was giving up her efforts to form a government, which would mean new elections within 90 days, or present her coalition to the Knesset on Monday, the first day the Israeli parliament returns from its summer recess.
She has scheduled a meeting with the president at his Jerusalem residence for late Sunday afternoon.
Livni, who was elected leader of Israel's ruling Kadima party last month, needs Shas to form a stable government. Without Shas, which has 12 mandates in the 120-seat Knesset, Livni has no majority, unless another ultra-Orthodox party, the United Torah Judaism (UTJ) with six mandates, joins without Shas. That party has however said so far it will not sit in a government without its fellow ultra-Orthodox party.
Shas' Council of Torah Sages, headed by the party's spiritual leader Rabbi Ovadia Yoseph, decided in a telephone vote Friday morning to reject Livni's final offer she had made to raise child allowances for large families, a top priority for the party.
A statement sent by the party to the media said that it decided against joining the coalition under the current circumstances, because its two demands - "assistance for the weak strata of society" and "protection of Jerusalem" - had not been met.
Shas wanted a commitment by Livni that she would not negotiate Jerusalem in her talks with the Palestinians and it demanded an extra 1.5 billion Israeli shekels (some 400 million dollars) in the 2009 budget for child allowances.
Most of the party's supporters are ultra-Orthodox, Sephardic Jews, or Jews of oriental origin, with large families, who depend on high monthly child benefits to get by. Livni's representatives had said they had offered almost 1 billion shekels in child benefits and alternatives.
"I know that we must pay and I am willing to pay in order to form a government, especially when I also know the price of elections in Israel. But I'm not willing to pay any price or to cross a line which in my eyes constitutes a lack of responsibility that we all have toward the state," Livni told her party headquarters near Tel Aviv late Thursday.
"This is the time to decide for all of us: either a government, or elections. And that decision will fall on Sunday."
So far, Livni has only signed a preliminary agreement with the Labour Party, with 19 seats the second largest in the Knesset after Kadima, which has 29 mandates. The hardline Likud party of Benjamin Netanyahu, along with Shas the third-largest party in the Knesset, has rejected her offer to form a government of national unity.
Netanyahu, who has enjoyed a consistent lead in opinion polls, wants early elections and has tried to dissuade Shas from joining a Livni-led coalition, meeting several times with its leaders.
Kadima caucus leader Yoel Hasson, accused Netanyahu of "doing everything he could" to sabotage the coalition negotiations with Shas.
Without Shas or the UTJ, with whom negotiations are ongoing, Livni's only remaining option is a minority government including the Labour Party, the Pensioners Party, the left-liberal Meretz party and the external support of Arab parties.
But Livni telephoned Labour Party leader Ehud Barak and told him she had no intention of forming a government with fewer than 65 legislators, Israel Radio reported. A government without UTJ, or Shas, and including only Kadima, Labour, the Pensioners Party and Meretz would have 60.
She would therefore either have to buy over UTJ or Shas would have to reverse its decision not to join. One Labour Party minister told Israel Radio he did not believe Shas' decision was final and "unchangeable."
Shas leader Eli Yishai, however, told the radio that without his two key demands being met, "we won't be able to join."
Livni was elected Kadima leader in September 17 primaries, held to find a replacement for Ehud Olmert, who resigned the premiership and party leadership to fight corruption charges.
Olmert's resignation, under Israeli law, means the automatic resignation of his entire cabinet as well, which has become a transitional government that continues to be led by Olmert until a new government is formed or early elections are held, probably by March, a year ahead of schedule.