Shas party rejects joining new Israeli government

An ultra-Orthodox party announced Friday it will not join a new coalition government being formed by prime minister-designate Tzipi Livni, making it more likely Israel will soon hold national elections.

Eli Yishai, leader of the Shas Party, said Livni did not agree to his party's demands for the allocation of more funds to poor Israelis and for a commitment that parts of Jerusalem will not be ceded to the Palestinians.

"Our decision is not to join because our demands were not met," he said.

A Shas statement said the rabbis who control the party, known as the Council of Torah Sages, decided that Shas "will not be able to join the government under these conditions."

Elections would throw Israel's political system into disarray and likely freeze the peace talks Israel is holding with the Palestinians and with Syria.

Current polls show that the likely winner would be the hardline Likud Party, headed by Benjamin Netanyahu.

Livni replaced the outgoing prime minister, Ehud Olmert, as head of Israel's ruling party last month and is trying to cobble together a new government. Shas, with 12 seats in Israel's 120-seat legislature, would be a key acquisition and give her a majority in parliament alongside her other coalition partners.

If Shas sticks to its refusal, Livni will be left with two options: trying to form a slim coalition with the help of smaller ultra-Orthodox and dovish parties or calling early elections this spring.

Livni said Thursday that if she did not have a new coalition government by Sunday she would call elections. In response to the Shas announcement, Livni spokesman Gil Messing said Friday only that her ultimatum "remained true today."

Shas has opposed any talks on the future of Jerusalem as part of Israel's negotiations with the Palestinians, who want the eastern part of the city as the capital of their future state.

Livni serves as the chief negotiator with the Palestinians, and Yishai, the Shas leader, said her representatives insisted that Jerusalem would be on the table in the peace talks.

"On Jerusalem, there was no possibility on their part to move in our direction, to make a decision that we will not negotiate on Jerusalem and that we will not talk about Jerusalem," he told AP Television News.

With two days to go before Livni's deadline, the possibility of a deal remained open. The Shas statement _ like Livni's ultimatum _ might be mainly a bargaining tactic.

Yishai hinted the party could still change its mind, telling Israel Radio that Shas had not decided that new elections should be held.

The decision was in Kadima's hands, he said, and "if they don't meet our demands, we won't be able to join."

"Nothing happened. I suggest everyone wait patiently," said lawmaker Otniel Schneller of Livni's Kadima Party.