Israeli Prime Minister Benjamin Netanyahu has signed a coalition deal with rival parties to form the next government in an agreement that was stalled for weeks due to tough negotiations.
The new coalition is the first in a decade to exclude ultra-Orthodox Jewish parties. It includes two new rising stars who have vowed to end a system of draft exemptions and welfare subsidies granted to thousands of ultra-Orthodox students.
Noga Katz, a spokeswoman for Mr Netanyahu's Likud-Yisrael Beitenu faction, said leaders of the Yesh Atid and Jewish Home parties struck the deal today after agreeing to give up last-minute demands to be named deputy prime ministers shortly before the beginning of the Jewish Sabbath. Those demands delayed the deal from being formalised at the last moment the night before.
Mr Netanyahu welcomed the agreement in a statement. "We will work together in the new government for the sake of Israel's citizens. We will act to strengthen Israel's security and to improve the quality of life for the citizens of Israel," he said.
The next step is for Mr Netanyahu to notify President Shimon Peres tomorrow night. The new Israeli government will be sworn in by Monday, two days before President Barack Obama is due to visit Israel.
Talks were stuck for weeks over the division of Cabinet portfolios and reforms in the military draft law. Although the Likud-Yisrael Beitenu bloc emerged as the biggest faction in the January 22 parliamentary election with 31 seats, Mr Netanyahu struggled to form a coalition with the necessary 61-seat majority in the 120-member parliament.
Newcomers Yair Lapid of Yesh Atid and Naftali Bennett of the Jewish Home party proved to be tough negotiators, forcing Mr Netanyahu to ask the president for extra time to build the coalition. If he had not formed a coalition by tomorrow, the country could have been forced to hold a new election.
Yesh Atid, which ran on a ticket vowing relief to Israel's struggling middle class and an end to draft exemptions for the ultra-Orthodox, will have the Finance and Education ministries. The Jewish Home, a party linked to the West Bank settler movement, has the Housing and Trade ministries.
Mr Netanyahu's bloc, meanwhile, will retain control of the powerful defence and interior ministries.
Former Foreign Minister Tzipi Livni, who leads a small dovish party committed to reaching peace with the Palestinians, joined Mr Netanyahu's coalition last month with promises that she would be his chief peace negotiator with the Palestinians.