Israel reaches 11th-hour deal on coalition govt: media

Israeli Prime Minister Benjamin Netanyahu has managed to reach an agreement over the shape of his new government after resolving an 11th-hour crisis with a key centrist partner, media reports said on Wednesday.

The last-minute deal means Israel's new coalition government is likely to be sworn in just days before a top-level visit by US President Barack Obama.

Netanyahu has been locked in intensive coalition talks ahead of a looming March 16 deadline to announce the shape of his new government which must have a working majority of at least 61 within the 120-seat Knesset, or parliament.

Although the outline of coalition emerged earlier this week, a dispute over which party would take the prestigious education portfolio had on Wednesday threatened to derail the deal.

The breakthrough came after Netanyahu agreed that the new centrist Yesh Atid party could take the education portfolio, while the interior ministry would go to his rightwing Likud, Israel's main television and radio stations reported.

The leaders of the main parties were meeting late on Wednesday to thrash out the wording of the agreement which will see Likud-Beitenu, which has 31 seats and is headed by Netanyahu and ex-foreign minister Avigdor Lieberman, form a government with Yair Lapid's Yesh Atid (19 seats) and Naftali Bennett's far-right Jewish Home party (12).

Until now, only one party has agreed to join a Netanyahu coalition -- the centrist HaTnuah of former foreign minister Tzipi Livni, which has six seats.

When the agreement is signed, which is likely to happen on Thursday, it will give Netanyahu a total of 68 seats.

On Saturday night, following the end of the Jewish sabbath, Netanyahu will formally notify President Shimon Peres that he has managed to put together a majority government, with the new coalition likely to be sworn by parliament on Monday, just two days before Obama's arrival, public radio said.

The Israeli parliament does not meet on Fridays, Saturdays or Sundays out of respect for the respective Muslim, Jewish and Christian days of rest.

According to Israel's private Channel 2 television, Netanyahu was forced "to give in to the demands of Yair Lapid and came out personally weakened."

Raviv Drucker, Channel 10's political commentator said the next government "would have a rightwards bent" both politically and economically, with hardliners set to assume responsibility for several key ministries relating to the settlements.

Jewish Home's number two, Uri Ariel, is an ultranationalist settler who is slated to take over the housing ministry which plays a key role in settlement construction.

The party, which adamantly opposes a Palestinian state, is also likely to control the parliamentary finance committee which also plays a role in funding the settlements.

Likud's Moshe Yaalon, a former chief-of-staff and strong advocate of Israel's settlement enterprise, is tapped to become the next defence minister, giving him the power to sign off on Jewish construction over the Green Line.

Earlier, Netanyahu had threatened to turn to the ultra-Orthodox parties to form a coalition if Lapid refused to back down from his "exaggerated demands."

Lapid has so far managed to convince Netanyahu to agree to a slimline cabinet of 20 ministers, down from 28, and to form a coalition without the ultra-Orthodox.

But the two locked horns over the education and interior portfolios.

"If, in the next hours there will not be a breakthrough in the negotiations with Lapid and he doesn't back down from his exaggerated demands, the prime minister will begin swift talks with the ultra-Orthodox parties," a Likud source said.

The threat was rejected out of hand by Yesh Atid.

"The coalition crisis that we are currently witnessing is not about which portfolio is given to which party. This is a struggle for the moulding of the future image of Israeli society," a senior party source said.

"Yair Lapid refuses to deviate from his principles and from his promises to the Israeli voter, even if that means that Yesh Atid will have to sit in the opposition."