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Israeli Prime Minister-designate Benjamin Netanyahu's right-wing Likud party signed its second
Israeli Prime Minister-designate Benjamin Netanyahu's right-wing Likud party signed its second coalition deal on Monday, with the ultra-Orthodox Jewish Shas Party.

Netanyahu has until April 3 to form a government, and will hold talks with Defense Minister Ehud Barak, who heads the Labour Party, later in the day.

The Likud party signed a deal last week with the ultra-nationalist Yisrael Beitenu party, led by Avigdor Lieberman.

Foreign Minister Tzipi Livni has refused to bring her Kadima Party into a coalition with Likud, over Netanyahu's refusal to commit to U.S.-backed negotiations on establishing a Palestinian state. Livni has also demanded a power-sharing deal.

If the premier in waiting fails to reach a deal with the Labour Party, he will be forced to form a strongly right-wing government with Lieberman, setting the scene for difficult peace talks.

Lieberman has in the past sparked controversy, saying Israeli Arabs should be forced to pass a loyalty test or lose their citizenship, and calling for the annexation of Jewish settlements in the West Bank. However, last month Lieberman said he supported the establishment of a Palestinian state rejecting the "far right" label commonly applied to him.


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