Jerusalem: Israel will take its first step on Sunday towards forming a new government after elections last week but it is likely prime minister Ehud Olmert will face obstacles in putting together a stable administration.
Most party leaders are expected to back Olmert, the head of the centrist Kadima party, as prime minister in talks with Israeli President Moshe Katsav due to start at noon (0900 GMT).
"Negotiations have started," Kadima's outgoing Tourism Minister Avraham Hirschson told Israeli public radio on Saturday.
"We have put forward our government programme and so we will be able to see who our best potential allies are."
Despite winning a general election on March 28, Kadima won only 29 seats in the 120-member parliament and Interim Prime Minister Olmert must forge a coalition with several parties to secure a majority behind a planned West Bank pullout.
The leading candidates to join Olmert's government are the centre-left Labour Party with 20 seats, the new Pensioners Party with seven, and two ultra-Orthodox Jewish factions, Shas, with 12 and Torah Judaism with 6 seats.
In talks over the new government, Labour has set its sights on the job of finance minister for party leader Amir Peretz, a former trade unionist.
Olmert has insisted that Kadima keep the post to enable it to pursue its free market policies.
Haim Ramon, a close Olmert associate, told Israel's Channel 2 television on Saturday Kadima would not give up the treasury job "because that would be tantamount to giving up half our mandate".
Israeli media said Peretz refused to meet with Olmert over the issue, and that Kadima may offer Labour the prestigious defence post to defuse the crisis.
"We don't exclude anyone, and certainly not Amir Peretz, who is a man of experience," Hirschson said, adding that the finance portfolio sought by Labour is not up for grabs as it is "key to the application of Olmert's programme".
But, he said, centre-right Kadima was ready to make social concessions to potential partners.
