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Labor Party Chairman Shimon Peres is rejecting calls from within his party for Labor to quit the government now that the disengagement has ended, arguing instead that the party should remain until the next scheduled elections, in October 2006, as long as Prime Minister Ariel Sharon accepts four conditions.

"If we quit in November-December, everything will come to a halt," Peres said in an interview with Haaretz on Monday. "The campaign will take half a year, two more months will be spent forming a government, and 2006 will go down the drain. In the meantime, poverty will thrive and Hamas will be active. The matter of Gaza will not be completed... As a decent person, I ask myself: If it is possible to begin to emerge from poverty in November, should we postpone this for a year? What, am I crazy?"

The conditions that Peres plans to present to Sharon are as follows - resolving the outstanding issues connected with the Gaza pullout, primarily the dispute over border crossings and economic cooperation, by the end of 2005; beginning diplomatic negotiations with the Palestinian Authority on the basis of the road map peace plan; devoting funds to a war on poverty; and continued development of the Negev and Galilee.

Regarding the illegal settlement outposts, Peres said that he intended to demand that Sharon dismantle them but would not issue an ultimatum on this issue.

Many Labor members are unenthusiastic about Peres's conditions, and senior party officials charged yesterday that even on the eve of the elections, Peres will not quit the government. "Labor can turn into a division of the Likud; the main thing is that he continues to be a minister," said one.

Nevertheless, Peres is not alone in his views. Almost all the Labor Party ministers would like to remain in the government until the elections, despite the electoral risk to the party of continued cooperation with Likud.

Meanwhile, Sharon is exploring the possibility of expanding his coalition to ensure its survival even if Labor does decide to leave. Yesterday, he met with Shinui Chairman Yosef Lapid and suggested that Shinui rejoin the government.

Sharon's office later stressed that Sharon did not give Lapid a specific proposal; he merely asked "why don't you join the government?" while the two were discussing the 2006 budget. Nevertheless, Lapid said that he was surprised by the overture.

Lapid said he told Sharon that Shinui would join the government if the Tal Law, which governs draft deferrals for yeshiva students, were amended and the government passed legislation enabling civil unions (a watered-down form of civil marriage). He said that Sharon seemed genuinely willing to discuss civil unions and even ordered Cabinet Secretary Israel Maimon to examine the issue.

The later attempt by Sharon's advisors to dismiss the significance of the overture, Lapid suggested, was due to fears of alienating the premier's existing coalition partner, the ultra-Orthodox United Torah Judaism party.

Lapid stressed that Shinui would not support the budget from outside the coalition, as it did last year. However, he said, talks with Sharon would continue in the coming months on ways to enable the party to join the coalition.

Sharon's advisors stressed that the premier is meeting with the heads of all the political parties, in preparation for the votes on the budget and on the appointment of new cabinet ministers that will take place when the Knesset returns from recess later this month. They also said that Sharon was considering adding Shas to the coalition instead of Shinui.

However, they added, his main efforts are currently focused on securing support for the budget from his own Likud Party. Last year, several Likud MKs opposed to the disengagement refused to support the budget, but Sharon hopes that with the disengagement over, and given his recent victory over Benjamin Netanyahu in the Likud Central Committee, he will be able to restore party discipline.

Last week, Sharon discussed the budget with Shas Chairman Eli Yishai and told him that he was willing to increase welfare spending, as Shas has demanded. Like Lapid, Yishai got the impression that Sharon's intentions were serious, and he said that if welfare payments were increased, his party would consider supporting the budget from outside the coalition. Both Shas and UTJ said that they were also encouraged by Sharon's decision - fiercely criticized by Lapid - to halt Shabbat road work at the Gannot interchange.