Acting Prime Minister Ehud Olmert has told Labor Party chair Amir Peretz that Yisrael Beiteinu head MK Avigdor Lieberman would be a member of the next government. Olmert made the statements in secret meetings between the two men, during which it was decided Labor would join the coalition as the senior partner.

Sources in Labor and Kadima said Peretz would be appointed defense minister, and that Labor would also be given the education portfolio.

Peretz did not deny Olmert's remarks about Lieberman, although Labor had pledged not to sit in the same cabinet with Yisrael Beiteinu. "When the time comes, we'll deal with it," senior Labor politicians said.

Meretz chair Yossi Beilin reiterated yesterday that Meretz would not join a cabinet in which Lieberman was a member.

During talks before the press conference yesterday Olmert rejected Peretz's original demand for a "joint" Kadima-Labor government. Olmert also rejected Peretz's demand that Kadima not negotiate with other factions before talks with Labor were complete.

Instead it was decided that Kadima could negotiate with all parties, but not before signing the guidelines for the coalition platform, which would be formulated by Kadima and Labor together.

Despite Peretz's repeated rejection of Yisrael Beteinu as a potential coalition partner with Labor, sources in the party said yesterday they did not believe Peretz's stand was "the end of the story." They said they believed Olmert would not accept the "stigma" that Peretz had placed on Lieberman. "Peretz said many things recently that he took back," a senior Yisrael Beiteinu figure said. "We have to reason to think this time he will be consistent. From our point of view, nothing is final yet."

The sources said Olmert was interested in bringing Yisrael Beiteinu into the government, and a decision would be made based on the guidelines for the cabinet that would be drawn up, and not on rejections on a personal basis."

Mazal Mualem adds: Peretz seemed relieved at the press conference; Olmert said the Labor-Kadima initiative had been mutual. Following the briefing, Peretz went to Labor Party headquarters in Tel Aviv to report to the faction on his meetings with Olmert the two previous nights. He said he had not worked to establish a coalition with the right, a move for which he had been slammed by the party leadership. "If I had wanted to do it, I could have done it in a few hours with no trouble at all," he said. Peretz told the faction that the test of the seriousness of Olmert's intentions had been the fact that the meetings with him had not leaked.