JERUSALEM, Israel - Foreign Minister Tzipi Livni will inform President Shimon Peres Sunday that she has been unable to form a coalition and recommends going to early elections.
Livni's decision followed meetings with her advisors Saturday evening at her Tel Aviv home.
Precipitating the late-night meetings was Shas chairman and Industry, Trade and Labor Minister Eli Yishai's announcement Friday morning that they would not join the government.
Yishai cited child welfare allocations and Livni's refusal to clarify her position on Jerusalem as the two main issues that fostered their decision.
"Jerusalem is not for sale," Yishai said, a statement welcomed by Likud chairman and opposition leader Binyamin Netanyahu.
"There was a failure of leadership and poor decision making," a Likud spokesman said.
"She was willing to give in on everything, except for keeping Jerusalem united. These sorts of failures prove that we need new leadership, which will indeed be elected," he said.
While negotiations with the left-wing Meretz party looked promising, Livni also needed to bring either the Pensioners Party or United Torah Judaism (UTJ) into the coalition.
Both turned her down over the weekend.
UTJ faction chairman MK (member of Knesset) Yaakov Litzman said his party would not enter a government that refused to take a clear stand on Jerusalem.
Pensioners party chairman MK Rafi Eitan said Livni was just using his party to bolster the coalition without really caring about his constituent's needs.
Kadima negotiator MK Tzachi Hanegbi remained confident to the "last minute" that they would be able to pull a government together.
"It isn't too late," Hanegbi said told Channel 2 television. "If we can establish a functioning government, it will be established," he said.
Outside of Meretz, most of Livni's associates, including Transportation Minister Shaul Mofaz and Defense Minister Ehud Barak, were leery of a razor-thin coalition.
Livni was also concerned that her image would be damaged by continuing to negotiate, while calling for early elections would make her appear a decisive leader who would not give in to extortion.
Her decision made, Livni informed Labor Party chairman and Defense Minister Ehud Barak, with whom she had worked out a quasi power-sharing deal, and Meretz chairman Haim Oron. She also called Knesset speaker Dalia Itzik.
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The president will now have three days to determine if another party leader could form a viable government. If that fails, the Knesset has three weeks to find someone to lead the government or to dissolve the current parliament and set a date for general elections.
In the interim, Ehud Olmert will continue to lead a transitional government, while major policy decisions will be put on hold until new leadership is in place, sometime between mid-January and mid-February.
Livni's decision virtually ends U.S. President George Bush's push for an agreement between Israel and the Palestinian Authority before his term in office ends.
Also on hold are negotiations for the release of captured IDF Corporal Gilad Shalit, as the transitional Cabinet doesn't have the authority to approve a list of Palestinian prisoners for a swap.
Meanwhile, Attorney General Menachem Mazuz has postponed his decision on indicting the outgoing prime minister for two of the six open investigations against him while he's serving as head of a transitional government.
Sources: Haaretz, The Jerusalem Post, YNet news, israel national news