Jerusalem, Apr 2: Israel took its first steps towards forming a new government today when the president began meeting political parties for talks likely to focus on an expected coalition led by interim Prime Minister Ehud Olmert.
Several parties should back Olmert to be the next prime minister after his centrist Kadima party won most seats in March 28 elections -- even though it fared worse than predicted.
President Moshe Katsav opened discussions with Kadima representatives, officials said. He will next meet members of the centre-left Labour Party, which came second.
Discussions are likely to last several days. Under Israeli law, the president then decides which party leader, expected to be Olmert, is best placed to form a government.
Labour is expected to join the Kadima coalition, although a sticking point could be who will get the vital post of finance minister, a job Labour sees as vital to its social programme.
Kadima won only 29 seats in the 120-member parliament, forcing Olmert to build a coalition to win backing for a planned uprooting of Jewish settlers from swathes of the occupied West Bank if peacemaking with the Palestinians stays frozen.
Israel would keep major settlements blocs under a plan that would remove tens of thousands of settlers and trace a border along a barrier Israel is building in the West Bank, where 240,000 Israelis live among 2.4 million Palestinians.
Palestinians condemn such a move, saying it would annex land and deny the viable state they seek in the West Bank and Gaza Strip, which Israel captured in the 1967 Middle East war.
A new Palestinian government led by the Islamic militant group Hamas, took office last week, vowing to continue fighting Israel. Hamas is sworn to the Jewish state's destruction.
Besides Labour, which won 20 seats, parties expected to join Olmert's government are the Pensioners Party with seven seats, and two ultra-Orthodox Jewish factions, Shas, with 12 and United Torah Judaism with 6 seats. Most can be counted on to support a West Bank withdrawal. WELFARE SPENDING Labour chief Amir Peretz focused his election campaign on raising minimum wages and increasing spending on welfare, spurring his party to seek the finance minister's portfolio.
Kadima has ruled that out while Israeli media have reported Peretz was refusing to meet with Olmert over the issue.
''The single issue Kadima has stood firm on is to keep the finance brief to ... avoid the development where there is effectively a prime minister for general issues and a prime minister for economic issues,'' senior Kadima official Roni Bar-On told Army Radio.
Labour's secretary-general Eitan Cabel said the party wanted the post to fight problems such as growing poverty.
Kadima has sought to play down any tension.
''Olmert has invited Peretz (for talks) and there is no reason he will not be part of the coalition,'' another Kadima official, Dalia Itzik, said.
Olmert, who assumed power from Ariel Sharon when he was incapacitated by a stroke in January, says he wants to set Israel's borders unilaterally in the absence of peace talks.
Renewing such talks looks remote now that Hamas has taken over the Palestinian Authority.
The group faces its own challenges after gunmen from Palestinian President Mahmoud Abbas's Fatah movement fired guns in a show of force in Gaza yesterday, defying orders from Prime Minister Ismail Haniyeh to stay off the streets.
The gunmen had demanded Haniyeh arrest members of a rival group they blamed for clashes on Friday in which three people died in Gaza.