By Jeffrey Heller

JERUSALEM (Reuters) – Prime Minister Benjamin Netanyahu had until late Wednesday to form a new ruling coalition with a recalcitrant ally or face the possible end of a decade of combative leadership of Israel.

As the hours ticked by, there was no sign of a breakthrough in talks with far-right former defense minister, Avigdor Lieberman. Parliament began a full-day debate on a motion to dissolve itself and call a new election if no deal is struck.

Political sources said Netanyahu was seeking agreement with the leaders of parties in the legislature for a mid-September election day.

Netanyahu had declared himself the winner of a national ballot last month, but he now has until midnight (2100 GMT) to tell President Reuven Rivlin whether he has put together an administration, and his political future hangs in the balance.

Failure to forge a coalition would take the task out of the 69-year-old Netanyahu’s hands, with Rivlin asking another legislator, either from the prime minister’s right-wing Likud party or from the opposition, to try.

That presidential move, which would sideline Netanyahu, can be avoided with a coalition agreement deal or if parliament approves an election.

Political commentator Chemi Shalev, writing in the left-wing Haaretz daily, said a last-minute agreement was still possible and Netanyahu would still be the favorite to win a new poll.

But he said Netanyahu’s critics now find themselves fantasizing about a world without him.

“It’s not an easy task, given his decade in power and the four more years he supposedly had coming. Young Israelis can’t even begin to imagine an Israel without him: Netanyahu as prime minister is all they’ve ever known,” Shalev wrote.

Lieberman has stuck to his guns in a battle with the ultra-Orthodox United Torah Judaism party, a member of Netanyahu’s current interim government, to limit traditional military draft exemptions for Jewish seminary students.

Without the support of Lieberman’s Yisrael Beitenu party, which has five seats in the 120-member Knesset, Netanyahu cannot put together a majority government of right-wing and religious factions led by Likud.

Political commentators said that as the prospects dimmed for a compromise with Lieberman, Netanyahu would focus his efforts on enlisting the 61 votes needed in parliament to approve a new election.

The brinkmanship six weeks after the closely contested April ballot poses another challenge to Netanyahu’s decade-long rule and deepens political uncertainty in a country riven with division.

PEACE PLAN

A new election could also complicate U.S. efforts to press ahead with President Donald Trump’s peace plan in the Israeli-Palestinian conflict. Even before it has been announced Palestinians have rejected it as a blow to their aspirations for statehood.

The White House team behind the proposal, including Trump’s son-in-law Jared Kushner, is in the Middle East to drum up support for an economic “workshop” in Bahrain next month to encourage investment in the occupied West Bank and Gaza. The group is due in Israel on Thursday.

Lieberman said on Wednesday he was not backing down in what he termed a matter of principle over the conscription issue, and he denied Likud allegations his real intention was to oust Netanyahu and lead a “national camp”.

“I am not a vengeful man and I don’t hold a grudge,” said Lieberman, who last year resigned as defense chief in a dispute with Netanyahu over policy toward Gaza.

Despite looming indictments in three corruption cases,

Netanyahu had appeared to be on course for a fifth term as head of a right-wing bloc after he squeezed past centrist challenger Benny Gantz, a former head of the Israeli armed forces.

Public attention had been focused less on coalition-building and more on moves Netanyahu loyalists were planning in parliament to grant him immunity and to pass a law ensuring such protection could not be withdrawn by the Supreme Court.

Netanyahu has denied any wrongdoing in the cases and is due to argue at a pre-trial hearing in October against the attorney-general’s intention, announced in February, to indict him on bribery and fraud charges.

(Editing by Angus MacSwan)