Israel's Olmert nears wider coalition deal

JERUSALEM, Oct 23 (Reuters) Israeli Prime Minister Ehud Olmert edged closer today to shoring up a government under fire over the Lebanon war by adding a far-right party whose leader wants to annex parts of the occupied West Bank.

In talks set later in the day with Avigdor Lieberman, an immigrant from the former Soviet Union who heads the Yisrael Beitenu party, Olmert plans to ''talk (to him) about joining the coalition'', said Miri Eisen, an Olmert spokeswoman.

Olmert's bid for a larger coalition follows opinion polls showing a significant decline in his popularity and that of his government over their handling of the recent war in Lebanon in which the army failed to crush Hezbollah guerrillas.

With the addition of Yisrael Beteinu, Olmert would control 78 seats in Israel's 120-member parliament, up from just 67 that currently support him, enhancing his prospects of passing a 2007 state budget on time.

''I know the prime minister is happy to have Yisrael Beteinu join,'' Eisen said, without predicting how soon an agreement might be reached.

Adding Lieberman to the government could create friction for Israel internationally and in the coalition itself over his calls to annex Jewish settlements in the West Bank and transfer some Israeli Arab towns to any future Palestinian state.

Lieberman said after talks with other Yisrael Beitenu leaders yesterday ''a clear decision was made'' to negotiate with Olmert, head of the centrist Kadima party, and a result could be reached within days.

Israel Radio said Lieberman was expected to be named minister in charge of handling a crisis over Iran's nuclear programme which Israel fears could be used to make a bomb. Iran says its atomic work is for energy purposes only.

Eisen confirmed Lieberman had asked for the job but would not elaborate.

Lieberman's agreement to join ranks with Olmert follows the government's approval yesterday of his bill to change Israel's electoral system by resuming a practice dropped a few years ago of choosing a prime minister separately from legislators.

The left-leaning Labour party, with a critical 19 seats, was divided over Lieberman's addition to the government and some lawmakers have vowed to fight it.

But some said Labour would eventually assent to Lieberman joining the government rather than drop out of the coalition, a move that could hurt its popularity further.

''We will be forced to accept Avigdor Lieberman,'' Tourism Minister Isaac Herzog of Labour told Israel Radio.

Reuters SSC VP1322