Prime Minister Ariel Sharon accepted on Sunday President Moshe Katsav's formal request that he form the 16th Knesset ruling coalition, saying that those who refused to join a unity government would be "betraying the Israeli public."

Sharon's Likud party won a massive 38 seats in the January 28 general elections; the next biggest party, Labor, won just 19 seats. The prime minister has 42 days to form his government, but can request an additional two-week period should he run into difficulties.

"Out of a sense of deep responsibility, I accept the task of setting up a new government in Israel," Sharon said.

He urged "all Zionist parties" to enter into a coalition. "Those who say no to unity are betraying the Israeli public," he said, in an apparent appeal to the Labor Party.

The prime minister warned that any party that sought peace must join the government or take responsiblity for its refusal to do so. "We will proceed together - left and right, religious and secular," he said.

Sharon said the new government would have to remove what he called the Palestinian "terrorist leadership."

"The new government will have to complete the campaign against terror, remove the terrorist leadership and create the conditions for the emergence of a new Palestinian leadership with which it will be possible to make real peace," he said.

In response, Labor MK Avi Yechezkel said that if Sharon could meet high-ranking Palestinian official Abu Ala in secret, he could do same for the Labor party, in order to prove his seriousness about establishing a government of national unity.

Speaking on Israel Radio, Sharon's campaign adviser Eyal Arad charged that Labor was prepared to speak with Palestinian Authority chairman Yasser Arafat but not with the Likud. He expressed the hope that Labor would recognize that an emergency situation called for national agreement.

Sharon also outlined some of the major issues facing the new government, and warned that the nation would have to make some sacrifices.

"Emerging victorious over terror, making peace and removing the Israeli economy from the recession: these are the tasks of the new government," Sharon said.

"These tasks will require difficult and painful national decisions, decisions that require a broad national agreement and concessions. I know that it's difficult for us to concede, but the future of the state, the future of our children, depends upon it."

Katsav said that 87 of the Knesset's 120 lawmakers recommended to him that Sharon form the next government. "The prime minister agreed to accept the task," Katsav said as Sharon stood at his side in the president's official residence.

Likud intends to immediately open negotiations with Labor on its possible inclusion in a unity government.

Labor, however, says it will not attend such negotiations or form a negotiating team, and will stick to the decision made by the party's bureau Thursday to stay out of a government led by Sharon.

Labor Party whip MK Ophir Pines-Paz said Sunday that Labor's decision to stay out of the unity government was already having a positive effect on Sharon.

"At the moment that we announced that we were in the opposition, the prime minister suddenly established a security fence in the Gilboa... and he began to meet with Abu Ala," Pines-Paz told Army Radio. "He didn't do these things when we were in the government."

The Likud negotiating team, headed by Uri Shani, is to meet representatives of other factions in Ramat Gan in the coming days.

Sharon said over the weekend that he would push to form a government "small in size, but with wide support." Associates of the prime minister said that Sharon would not rule out a government with only 61 MKs, including the National Religious Party and Shinui, if United Torah Judaism were to give its support from outside the government.

"If that would create a stable government capable of functioning, then why not?" Sharon's associates said. But Sharon would still prefer a government that included Labor, they said, even though it is clear to him that the chances of that happening are small. If Shinui becomes the second-largest party in the coalition, Sharon may give it two of the main portfolios - the Foreign Ministry and the treasury, they added.

Labor reiterated that it would not join a unity government unless Sharon intended to evacuate settlements in the territories, build a separation fence and make fundamental changes to the state budget.

Meanwhile, candidates within the Likud - including MKs Reuven Rivlin, Michael Eitan and Abraham Hirchson - are preparing to compete for the position of Knesset Speaker. Close associates of the prime minister say that if Rivlin, who enjoys Sharon's support, loses in the secret elections, Sharon will fulfill his promise and make Rivlin a minister.

Labor MK Shiri trying to organize talks on unity government Labor MK Weizman Shiri, who was not elected to the party's list for the 16th Knesset, is trying to call together a meeting of the Labor central committee in order to begin coalition discussions with the Likud negotiating team.

Shiri has already begun to collect the 200 central committee signatures required to arrange such a meeting, and is expected to have the necessary number of signatures by Sunday.

Last week, the Labor Party's bureau rejected the possibility that the party would join a unity government led by Sharon and decided that the party would not hold negotiations with the Likud on the subject. Shiri said, however, that the bureau is not authorized to make this decision.

According to Shiri, his proposal is not intended to allow Labor into the coalition, but rather to enable the central committee to exercise its right to decide whether or not to hold negotiations.