Defense Minister Amir Peretz and Labor Party chairmanship hopeful MK Ami Ayalon met Wednesday afternoon at the Defense Ministry in Tel Aviv, and discussed Peretz's possible support of Ayalon in the upcoming second round of primaries for party leadership.

Ayalon will be facing former prime minister Ehud Barak in a runoff for the party leadership on June 12, and the kingmaker is liable to be outgoing party chair Peretz, who came in third in Monday's first round with 22 percent of the vote.

The meeting, most of which was held privately between the two Laborites, lasted more than an hour. Prior to the meeting, Ayalon told his camp that he does not intend to offer Peretz any deals in exchange for his support, he only intends to offer a "partnership."

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Both camps reported a positive outcome after the meeting, and said the two had discussed ideological matters in the financial, social and political realm. Ayalon reportedly told Peretz that he sees him as part of the future leadership of Labor.

After the meeting, both Peretz and Ayalon were planning to sit down with their advisors and discuss the topics that had been brought up privately between the two. Peretz will convene his advisors Wednesday evening in order to decide on a strategy in possible continuing ties with Ayalon. It is possible that Peretz's advisors will put together a negotiations team.

On Tuesday, Barak's and Prime Minister Ehud Olmert's associates said Olmert had no intention of giving the Labor Party the finance portfolio in addition to the defense portfolio, which the party currently holds, even though this would aid Barak's election as Labor Party chairman.

The idea arose that by offering Labor finance as well as defense, Olmert could enable Barak to buy Peretz's support by promising him the treasury. Barak, who is Olmert's preferred candidate, wants the defense portfolio for himself.

Peretz's supporters said Tuesday that if Barak could assure him of the treasury, which he has always coveted, he would be willing to back Barak in exchange. They argued that this would be a worthwhile deal for the prime minister, since Ayalon has pledged not to sit in a government led by Olmert, whereas Barak has been less definite on that subject.

But Barak, like Olmert, said that no such deal was on the agenda. His associates added that no Barak-Peretz meeting was expected in the next few days and that Peretz's support would only serve to weaken their man.

Ayalon, in contrast, wasted no time: He was already on the phone with Peretz Monday night, immediately after the first-round balloting finished, and the two are expected to meet on Wednesday. However, Peretz's associates said he will not decide whom to back until this weekend, after consulting with his supporters in the Labor faction.

Ayalon also spoke Tuesday with MK Ophir Pines-Paz, who won fourth place in Monday's balloting with 8 percent of the vote, and they are expected to meet either Wednesday or Thursday.

Peretz intends to present a series of demands on socioeconomic matters to whichever candidate he ultimately backs, and he is also expected to demand guarantees of a cabinet position that would enable him to deal with socioeconomic matters. "No candidate has been ruled out," said MK Yoram Marciano, a Peretz supporter. "We'll go with whoever flies the social flag."

Peretz is considered more likely to choose Ayalon, as he and Barak, whom Peretz attacked throughout the campaign, are thought to have trouble getting along. Nevertheless, a partnership with Ayalon would also entail difficulties: Peretz wants to remain in the government, whereas Ayalon has said that he would refuse to do so as long as Olmert remains prime minister. Barak, in contrast, has said he would be willing to sit in Olmert's government as long as a date is set for new elections.

Olmert's associates said on Tuesday that while a partnership with Barak would be more convenient, they believe that Ayalon will also have no choice but to remain in the government, as a majority of Labor's central committee does not want the party to pull out. They also said that once Labor chooses its new leader, creative solutions to the portfolio problem could be found.

Meanwhile, both candidates are busy formulating their campaign strategies for the runoff. Barak intends to stick with the same two messages that secured him first place in Monday's balloting: that only he can beat Likud chair Benjamin Netanyahu, and that he is the most suitable candidate to lead the country, or to occupy the Defense Ministry, in wartime.

Ayalon will focus on winning the support of Peretz and Pines-Paz, and also on closing his gap with Barak in the Arab sector, where Barak outpolled him almost three to one. Ayalon's associates said Tuesday that in terms of socioeconomic views, they believe that Peretz naturally belongs with Ayalon rather than Barak.

Barak's staff, in contrast, is still examining whether a hook-up with Peretz makes sense. An alternative strategy that they are considering would be to ignore Peretz but to try to split off some of his supporters. One likely candidate, in their view, is Minister Ghaleb Majadele, who would like to remain in the government.

Majadele, however, indignantly rejected this possibility on Tuesday. "I'm a member of Peretz's camp and of the social camp, and that's where I belong," he said.

Peretz, for his part, is already making plans to shore up his power base in the party, including by setting up "social headquarters" throughout the country and by working to increase his camp's representation in party institutions. "Amir Peretz is beginning his return to the Labor Party chairmanship today," declared one associate.