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In private conversations Peres has had over the past few weeks with senior political figures and party leaders, he has been making statements to the effect that Prime Minister Netanyahu cannot advance the peace process with the present coalition government controlled by the right wing. To move forward, the president has been saying, Netanyahu will have to bring Kadima into his coalition and broaden the base of his government with moderates.

Peres has noted in these conversations that he is still convinced that Netanyahu is interested in taking historic steps vis-a-vis the Palestinians. The president says he has faith in the intentions and capabilities of the prime minister, with whom Peres has excellent relations. The president has also said, however, that Netanyahu is restricted by the right wing, that he wants to move forward but his right flank is not permitting it, and that the prime minister is concerned about his government's longevity. In order to make history, Peres says, the prime minister has to bring in Kadima.

Peres has expressed concern over the prospect of a sharp decline in Israel's international standing if the current diplomatic stalemate continues. He says bringing Kadima into the coalition will enable the prime minister to achieve a breakthrough in the peace process, which will improve Israel's standing in the world.

The president has said Netanyahu must make a serious offer to Kadima "with respectable terms." He is not supportive of Netanyahu's attempts at splitting Kadima and bringing seven or more of its members into his coalition.

Peres has also made comments along these lines directly to Netanyahu and to Kadima leader Tzipi Livni in face-to-face meetings in his office at the President's Residence. Up to now, Peres' efforts have not shown results. Relations between Netanyahu and Livni are extremely strained and lack trust or mutual respect, as was seen again this week at a meeting of the Knesset's Foreign Affairs and Defense Committee on Tuesday, where the two openly sparred and then on Tuesday in the Knesset plenum, when Livni launched a scathing attack on Netanyahu, among other grounds, for his ceaseless attempts to split Kadima.

'PM won't replace Lieberman even if he's forced to resign'

"Even if [Avigdor] Lieberman is forced to resign, Bibi won't name a replacement as foreign minister," one of Prime Minister Benjamin Netanyahu's associates said Wednesday, referring to the premier by his nickname.

This comment follows the latest allegations of criminal conduct tied to Foreign Minister Lieberman.

Still, anyone looking for cracks in the coalition will be hard-pressed to find them. Sources close to Netanyahu say that even if Lieberman is indicted, the matter will last for months, during which Lieberman is expected to invoke his right to a hearing.

The foreign minister is not expected to put the coalition in any danger for the duration of that period either. Lieberman committed in the past to resign from the ministry if he is indicted, and he is expected to make good on the commitment, but not to pull other ministers from his Yisrael Beiteinu party from the government.

Netanyahu is aware of this situation, and in return intends to keep the foreign minister's portfolio for himself.

"Lieberman has no reason to pull his ministers out of the government," a senior Likud minister said Wednesday, "and in addition, he would prefer to leave a measure of control over the Public Security Ministry and the Constitution [Law and Justice] Committee." In conversations with Yisrael Beiteinu officials it was apparent that Lieberman remained the party's boss, without whom it is doubtful the party would maintain its power.

It is thought that if Lieberman resigned, he would appoint MK Fania Kirshenbaum to fill in for him as party leader.

Sources close to Netanyahu say he has not shifted his strategy since the last election. He remains committed to cooperation with the ultra-Orthodox parties and with Lieberman.

A senior Likud official said: "Netanyahu knows that if he breaks up [that] bloc, he's finished."

Still trying to break up Kadima

At this point, the prime minister is continuing his efforts to break up the Kadima party. His associates say he has managed to convince six Kadima MKs to leave and the moment that he has a seventh, which is only a matter of time, the split will occur.

Such a break-up would constitute a kind of insurance policy for Netanyahu if things get complicated with Yisrael Beiteinu.

Kadima leader Tzipi Livni attacked Lieberman and Public Security Minister Yitzhak Aharonovitch as well as Netanyahu himself Wednesday, claiming they were not backing the police in the Lieberman investigation.

Aharonovitch's office responded by saying that the minister had in fact issued an official statement in support of the police.