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Prime Minister-designate Tzipi Livni has reportedly said she would discuss a demand from Shas to extend the rabbinical courts' jurisdiction to civil disputes between couples to try to persuade the ultra-Orthodox party to join the coalition. Consequently, Shas reported some progress in the coalition negotiations yesterday.

At the same time, Livni yesterday set an ultimatum giving her potential coalition partners three days to join a new government under her leadership or face the prospect of new elections.

Shas had previously demanded expanding the rabbinical courts' jurisdiction during 2006 coalition negotiation with Prime Minister Ehud Olmert. However Olmert, Justice Minister Daniel Friedmann and Social Affairs Minister Isaac Herzog objected to this demand, which they said would infringe on the secular public's rights and undermine the status quo.

If Shas' demand is met, Livni may have to face opposition from within the Labor Party and strain the already tense relations with Friedmann.

As far as Shas is concerned, the move is a coup - bolstering the rabbinical courts that would be able to rule on property issues between couples, among other things.

Shas has recently raised this demand in talks with Livni, arguing that an agreement on this issue had already been reached and must be kept.

Livni also agreed to revoke the reduction in the yeshiva budget, estimated at NIS 400 million, for 2009. However, Shas is still dissatisfied with Livni's offer regarding child allowances. Shas is demanding NIS 1 billion while Livni is willing to give NIS 600 million in the 2009 budget and give Shas NIS 350 million for sectorial needs detailed in the coalition agreement.

Shas' spiritual mentor, Rabbi Ovadia Yosef, is now expected to decide whether the party can join the coalition.

Livni said again, yesterday, that she would not pay "any price" for a coalition, but senior Kadima figures said she would not be able to set up a narrow-based government without Shas. Livni, who under law has until Nov. 3 to put together a parliamentary majority, has informed President Shimon Peres of her decision.

"This is the time for decisions for all of us - either a government or elections - and the decision will fall on Sunday and until Sunday everyone is going to have to do some soul searching and make their decision," she told her Kadima party.

Since Livni's election a month ago as head of the Kadima party she has been meeting almost daily with potential partners who have made stiff demands for political posts and budget funds.

Kadima figures estimated that barring a strategic decision on Shas part not to join Livni's government, the ultra-Orthodox party's strategy to join the coalition was now set.

Livni further made it clear yesterday that she was not going to continue the talks indefinitely.

"Our proposals enable the partners to show their voters that they have achieved something. Time is not on our side," she told Kadima members.

Kadima's faction members voted in support of Livni and her negotiations team, but the MKs who object to a narrow government, mainly from among Mofaz-supporters, complained that they were not allowed to express their opinion.

Also Thursday, the Pensioners Party pulled out of coalition negotiations with Kadima. The party argued that the offer that had been made to them had been far from acceptable. "In this situation, there is no point in engaging in negotiations - it's a waste of time," party officials said.

The Pensioners Party is dmeanding NIS 1 billion for pensioners and object to a narrow government. Party chairman Rafi Eitan said Livni proved in the draft proposal she gave the party that she does not care about pensioners' welfare.

Meanwhile, Livni said she would also examine the possibility of setting up a narrow government with Meretz. Kadima's negotiation team met Meretz leaders and reported progress.

Meretz chiarman MK Haim Oron said there was a chance Meretz would be part of the next government, but was not sure whether it would actually be formed.

Transportation Minister Shaul Mofaz is continuing his efforts to prevent the creation of a narrow-based government headed by Livni. Mofaz yesterday asked Pensioners Party chairman Rafi Eitan if he would join a narrow government. Eitan said his party would prefer to have elections.

In the past week, Mofaz reportedly asked Shas chairman Eli Yishai not to join such a government.

Mofaz is also forging his own camp within Kadima, claiming that half the party's members, who supported him for leadership, deserve representation.

Livni met Mofaz yesterday before the faction meeting at which she spoke of the importance of Kadima's unity.