The prime minister said he prefers a narrow coalition, but early elections would take place if he fails to form the coalition, according to the radio.

The party bloc of the National Union-Yisrael Beiteinu, who commands seven parliamentary seats, withdrew from the government in March to protest Sharon's feeble policy against the Palestinian National Authority and its leader Yasser Arafat.

The hardest-ever crisis Sharon is facing obviously came after the center-left Labor party's announcement of withdrawal from the government on Wednesday, which would be in effect on Friday evening and would bring about the collapse of the 20-month-old national unity government.

The Labor, led by former Defense Minister Binyamin Ben Eliezer, controls 25 seats in the Knesset (parliament). Its withdrawal would lead Sharon's coalition a minority of 55 seats in the 120-seat parliament.

Avigdor Liberman, chairman of the National Union-Yisrael Beitenu, however, has previously made clear that his party bloc would prefer to take part in the early elections rather than join Sharon's planned narrow coalition.

Liberman is known as a close ally of former Prime Minister Binyamin Netanyahu, who is the major rival for the leadership of Sharon-led Likud Party.

In the shadow of the government crisis, Sharon's next test will come on Monday when the parliament vote on a non-confidence motion presented by left-wing Meretz Party.

Also in the session, the parliament is expected to approve the appointment of Shaul Mofaz as the defense minister's post that was left empty after Ben Eliezer's resignation.

Mofaz, 54, as the Israeli army's 16th chief of general staff, commanded an unprecedented massive operations, coded as "the Operations of Defense Shield", against Palestinian targets in the West Bank in March.

Sharon's top aide Gideon Sa'ar said the appointment of Mofaz would allow the prime minister to spend more time dealing with the economy and other internal matters, Israel Radio reported.

Sa'ar added that Mofaz could be a most-valuable asset to the government with regards to the war against terrorism and the planned US attack on Iraq.

Arafat said Mofaz's appointment would be an obstacle in the Mideast peace process, adding that "Mofaz on one side, (Deputy Chief of General Staff Moshe) Ya'alon on the other and Sharon over them, what do you imagine will happen in the region?"

(Xinhua News Agency November 2, 2002)