Right-wing leader Benjamin Netanyahu on Friday accepted a mandate to form Israel's next government and immediately called for a broad, national unity coalition with centrist and left-wing partners.
Such a coalition might create a stable, middle-of-the-road government immune to the sort of pressure from fringe parties that has hamstrung previous Israeli administrations.
But there was no sign that his rivals would accept, and Netanyahu may have no alternative but an alliance with far-right and ultra-religious parties, which could tie his hands on making peace with the Palestinians and tightening fiscal discipline.
Palestinians and Arab neighbors were likely to see his nomination as confirmation that most Israelis are in no hurry to pursue peace deals with them.
Netanyahu, 59, leads the hawkish Likud party. He was prime minister before in the late 1990s and now has six weeks to put together a coalition for a second turn at the helm.
Likud more than doubled its seats in the election 10 days ago in which the security of the Jewish state was the paramount issue, after a 2006 conflict with Hezbollah Islamists in Lebanon and a war with Islamist Palestinian Hamas in Gaza last month.
But there was no clear winner.
With 27 seats in the 120-seat Knesset, Netanyahu ended up one seat behind the centrist Kadima party of Tzipi Livni, the dominant partner in the outgoing coalition.
The electorate's rightward drift, however, gave him a better chance of achieving a majority with like-minded parties.
But his nomination by President Shimon Peres on Friday was a break with Israeli tradition, which has always given a governing mandate to the leader of the first-placed party after elections.
Netanyahu urged his opponents to close ranks for the sake of the country and join his government:
I call on Kadima chairwoman Tzipi Livni and Labor Party chairman Ehud Barak and I say to them -- let's unite to secure the future of the State of Israel.
Repeating his campaign message, Netanyahu said Iran was seeking nuclear weapons that could threaten Israel's existence and challenging Israel through Islamist proxies, Hezbollah in south Lebanon and Hamas in Gaza.
In the Gaza Strip, a spokesman for the ruling Palestinian Hamas movement predicted conflict and instability.
This means that Zionist policy is going from bad to worse, said Fawzi Barhoum. The nomination of Netanyahu does not point to security, peace or stability in the days ahead.
GRAND COALITION UNLIKELY
Livni, 50, has shown no interest in joining Netanyahu.
After Peres failed in last-ditch meetings on Friday to persuade them both to form a unity government, she indicated she was not prepared to serve under a Likud leadership.
It would be a coalition that doesn't allow me to pursue my path, the path of Kadima as we promised the voters, she said.
Yoel Hasson, who leads Kadima's parliamentary group, told Reuters the party's lawmakers would meet on Sunday: I imagine the decision will be that we are going into opposition, he said. We won't enter any government headed by Netanyahu.
Netanyahu's rivals to the left favor pursuing talks with secular Palestinian leaders, backed by U.S. President Barack Obama, that could hand most of the occupied West Bank and parts of Jerusalem to a new Palestinian state in return for peace.
U.S.-educated Netanyahu, who had poor relations with the Clinton administration during his previous term as premier, says that Israel's unilateral ceding of occupied Arab land, notably Gaza in 2005, has backfired, inspiring Islamist enemies.
He advocates a longer-term, bottom-up approach to peace with the Palestinians built on economic development of the West Bank and a gradual handover to Palestinian security forces.
I don't see much (peace) progress happening regardless of which coalition he forms, said analyst Eliezer Don-Yehiya.
The gaps between Israel and the Palestinians are significant. But he will have a problem if his right-wing partners sense there is some kind of progress in talks. In this case right-wing parties will make things difficult for him.
Accepting his mandate, Netanyahu also noted that the most serious world economic crisis in 80 years threatens the jobs of hundreds of thousands of Israelis.
The former finance minister championed welfare cuts and free-market practices in the early part of this decade, in the face of strong opposition from entrenched groups.
But he has apparently reached a quick accord with Israel's biggest religious party, Shas, a likely coalition partner, and is unlikely to pursue the same policy of privatization and rolling back social benefits, Don-Yehiya said.
(Editing by Alastair Macdonald)