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Kadima chair Tzipi Livni's insistence on a rotation arrangement is undermining the creation of a unity government, Likud leaders close to the parties' coalition talks said Saturday.

Livni met with Likud leader Benjamin Netanyahu in secret on Wednesday night. Sources said there had been a "narrowing" of differences since previous meetings, though gaps between them remain.

The major outstanding dispute, they said, was the issue of a rotation government. Kadima officials claim Netanyahu has agreed to an "unequal" agreement, under which he would be prime minister for three years and Livni for a year and a half, though sources close to the Likud chief deny a rotation proposal is even under consideration.

Netanyahu is now waiting for Livni to decide whether to create a negotiating staff, which would include representatives of both parties, to pursue official coalition talks. Some senior Likud officials have advised Netanyahu to agree to the rotation plan, while others prefer forming a 61-seat coalition with smaller right-wing and religious parties.

An associate of Livni said Saturday, "If a coalition agreement is not signed between Likud and Yisrael Beiteinu, that will be a sign from Netanyahu that he is serious."

These parties' negotiating teams are scheduled to meet Sunday. Ten days ago they began coalition talks, which were held through several channels, but several senior Likud officials expressed dissatisfaction with what they saw as Yisrael Beiteinu chair Avigdor Lieberman's excessive demands for joining the government.

In her talks with Netanyahu, Livni is demanding complete diplomatic autonomy and control over negotiations with the Palestinians if she continues as foreign minister. The Kadima chair would not be a "cocktail" foreign minister, she told Netanyahu.

Meanwhile, Netanyahu is continuing talks with Labor chair Ehud Barak, despite the slim chances of that party joining the coalition.