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Defense Minister Amir Peretz said recently that he is "seriously considering" uniting the Labor Party, which he leads, with Meretz-Yahad, to form a single "center-left" party, even though he had opposed such a merger in the past.

Peretz said this week that he plans to meet with Meretz Chairman MK Yossi Beilin and Meretz-Yahad faction leader MK Avshalom Vilan. He also said that he is considering launching a new diplomatic initiative.

The idea of merging the two parties was broached in an article written by Vilan on the eve of Yom Kippur in the Kibbutz Movement's journal, Daf Yarok. In his article, Vilan wrote that there are no fundamental differences between Labor and Meretz, and that by joining forces, the two parties, combined with those who defected from Labor to Kadima, could form a united bloc against the right.

Peretz met with Vilan in the Knesset earlier in the week and told him that they must meet to discuss his proposal.

The Labor leader told Haaretz yesterday that he rejected the idea of merging with Meretz in the past because he believed that Labor ought to have a party with a very clear agenda to its left. Under the current circumstances, however, there is no point in such a separation, he said, and there is no real reason why Meretz and Labor should not cooperate in a single party.

Peretz said that the public's political mood is leaning to the right, and therefore, forming a more homogenous structure, one that could be termed "center-left," would be advantageous to those who favor peace: It would enable them to sharpen their message and to present more audacious programs to rescue the region from its "scary" diplomatic standstill.

The Labor leader's statements reflect a growing trend among the moderate Israeli left. Labor faction leader MK Ephraim Sneh, a Peretz associate, raised a similar proposal recently, in which he called for a merger among Labor, the Pensioners' Party, centrist and leftist Kadima MKs and parts of Meretz.

The idea is also being promoted by members of the Kibbutz Movement, which is represented in both Meretz and Labor.

In recent weeks, Peretz and those close to him in Labor have been spending a great deal of time discussing the need to present a new diplomatic program, which would include starting talks with Palestinian Authority Chairman Mahmoud Abbas. Sources close to Peretz said that he cannot accept the standstill on the diplomatic front, and it is possible that he will have to propose his own initiative in an effort to break out of the current dead end.

The sources also predicted that such an initiative would help Peretz improve his poor position both in public opinion polls and in the Labor Party.

However, Peretz associates said that he is not interested in a public, political dispute with Prime Minister Ehud Olmert that could generate a coalition crisis - though such a confrontation might erupt in any case over the prime minister's insistence on bringing MK Avigdor Lieberman and his Yisrael Beitenu Party into the government.

Peretz has said that he is willing to pull out of the coalition if Lieberman joins it. However, any such move would involve a bloody battle within his own party, as some Labor MKs oppose leaving the government. Among the leading opponents of a pullout from the coalition are National Infrastructure Minister Benjamin Ben-Eliezer, a former party chairman, and Agriculture Minister Shalom Simhon.

Though he now opposes Lieberman's entry, the Labor leader initially remained silent about the idea for nearly 10 days after it first arose. Sources close to Peretz justified this silence yesterday by saying that Olmert had assured him that the talks with Lieberman revolved solely around the latter's proposal to change the system of government. Lieberman has called for changing Israel's parliamentary system to a presidential one.

Meanwhile, a senior source in Kadima with close ties to Olmert told Haaretz yesterday that only if Peretz relinquishes the defense portfolio would the government be able to rehabilitate its public image. According to the source, internal polls in Kadima show clearly that the public "is not willing to forgive Olmert for appointing Peretz to the Defense Ministry."