Labor Party negotiators stormed out of coalition talks with Likud at midnight last night, charging that Likud is "unwilling to make any changes in [Finance Minister Benjamin] Netanyahu's ruthless economic program in order to introduce even a drop of humanity and consideration for the citizens of Israel."

Likud negotiators charged in response that Labor's budgetary demands would cause the 2005 budget to exceed its framework. Labor wants some NIS 600 million in additional funding for university students, culture and the elderly.

Nevertheless, Likud sources said they did not take the crisis seriously, viewing it as a ploy to improve Labor's bargaining position. They added that they expect to continue talks today.

However, Labor negotiator MK Dalia Itzik said her party would not attend today's scheduled session. "We're willing to take a lot for the sake of the disengagement, but our impression is that they were quibbling with us in an insulting fashion," she said.

Coalition talks with Shas also hit a roadblock yesterday, after the party's spiritual leader, Rabbi Ovadia Yosef, informed party chairman Eli Yishai that he sees no reason to rescind his ruling against the disengagement plan.

Yishai will discuss the issue with Yosef again today, but he told Haaretz he does not believe the rabbi will change his mind. Since Labor has said it will not join a government with Shas unless it supports the disengagement, Yosef's ruling is liable to keep the party out of the coalition.

Likud negotiators are still trying to find a formula that would allow Shas to join. Yesterday, they argued that since Yosef's original objection was to unilateral disengagement, the new Palestinian leadership, with whom the pullout could be coordinated, justified changing his mind. But Yosef was unconvinced, and stressed he is not interested in having Shas serve as a fig leaf for the government.

Another problem was Labor's announcement yesterday that it would not agree to any changes in the government's policies on religion and state. Shas is demanding several changes in this area.

In contrast, Shas said there has been progress over its budgetary demands, which Yishai presented to Netanyahu yesterday. Netanyahu has not yet responded, but Shas sources said that Prime Minister Ariel Sharon's office sent positive signals about the possibility of rescinding some of the recent cuts in child allowances, which is one of the party's key requests. It also wants substantial increases in welfare funding.

Though Shas originally doubted that Sharon truly wanted it in the government, the party now believes he is sincere. However, it is worried by Sharon's tight timetable: He wants to present a new government to the Knesset Monday, and Shas is not sure an agreement can be reached by then. Sharon yesterday ruled out the possibility of Shas' joining at a later stage.

The one party with which talks seem to be going smoothly is United Torah Judaism: Party negotiators MKs Moshe Gafni and Yaakov Litzman said yesterday they thought an agreement could be signed today.