A last-minute agreement yesterday afternoon found Silvan Shalom a portfolio, shortly before the Benjamin Netanyahu-led government was sworn in.

Shalom agreed to Netanyahu's offer of the ministerial portfolios of regional development and development of the Negev and Galilee, in addition to the position of vice premier (a title also held by Moshe Ya'alon).

The offer followed days of conflict between the party rivals, which threatened to divide Likud and hamper the new coalition's ability to function.

Netanyahu also told Shalom he could be a member of his inner security cabinet, but that matter is under dispute because Yisrael Beiteinu chairman Avigdor Lieberman is holding Netanyahu to his promise to keep the number of members down to five. Until yesterday, Shalom had hoped he might become finance minister, but that was dashed when Netanyahu offered the post to Yuval Steinitz.

Before the swearing-in ceremony, Netanyahu told the Knesset he would work toward Mideast peace, warned of the threat of Iranian nuclear ambitions and vowed to bring captive soldier Gilad Shalit home.

"We will not let anyone question our right to exist," he said. "Israel can't afford to treat threatening statements lightheartedly."

Netanyahu said that blocking the Iranian nuclear program was in the interest of both Israel and the Muslim world, adding that he hoped the region could work together "to block terrorism in every direction and fight it until the end."

"Always, and now more than ever, Israel has strived to reach full peace with the entire Arab and Muslim world, and now that yearning is supported by a joint interest of Israel and the Arab states against the fanatical obstacle threatening us all," he said.

Netanyahu did not explicitly endorse an independent Palestinian state while declaring his commitment to peace, but said: "We do not wish to rule another people. We do not want to rule the Palestinians ... Under the permanent-status agreement, the Palestinians will have all the authority they need to rule themselves."

He also warned the Palestinian Authority that it must do its part to fight terror if it is serious about peace.

"I say to the Palestinian leadership that if you really want peace, we can achieve peace," he said, to the jeers of Arab and left-wing lawmakers. He offered negotiations on "three parallel tracks - economic, security and diplomatic," and pledged to do whatever it takes to free Shalit.

The outgoing prime minister called on Netanyahu to continue efforts toward peace with Syria.

"I was not privileged to realize my dream and achieve true peace with our neighbors," said Ehud Olmert. "Although we have made considerable progress in this field as well and discussed topics we did not dare discuss in the past, the work is yet to be completed."

Kadima chairwoman Tzipi Livni vowed that under her leadership, the opposition would act responsibly to restore public confidence in the Knesset.

But the party may be short one MK. Haim Ramon of Kadima, who served as vice premier under Olmert, is planning to retire from politics, top party officials said. Ramon was disappointed by the failure of his attempt to create an alliance between the centrist Kadima party and the far-right Yisrael Beiteinu in an effort to block Netanyahu.

After that effort fell through, Ramon pushed for Kadima to join the Netanyahu government, but was again voted down.

Some left-wing MKs slammed what some have called an unnecessarily bloated government.