Israeli Prime Minister Benjamin Netanyahu on Monday signed an agreement with the ultra-Orthodox Shas party to form a coalition government, two days ahead of a deadline to complete his line-up.

The agreement with Shas is the third Netanyahu has signed with coalition partners ahead of a midnight (2100 GMT) deadline on Wednesday to announce his government.

Netanyahu had hoped to forge a rightwing religious line-up with a majority of 67 of the parliament's 120 seats.

The accord with Shas secures him 53 seats in the Knesset.

His next move would be to persuade the head of the far-right Jewish Home party, Naftali Bennett, to join the coalition, a move that would bring him another eight seats to secure the 61-seat majority.

Netanyahu's Likud party said in a statement that Shas would obtain the ministries of economy and religious affairs, as well as the portfolio of development in the Golan Heights and Negev desert region.

The accord came less than a week after Netanyahu struck agreements with the ultra-Orthodox United Torah Judaism party and the centre-right Kulanu.

The announcement late on Monday came hours after media reports quoted outspoken Foreign Minister Avigdor Lieberman as saying he would not join a coalition led by Netanyahu.

"We have reached the clear and unequivocal conclusion that it would not be right from our perspective to join the present coalition," Lieberman was quoted as saying by Haaretz website.

Lieberman's hardline anti-Arab party won six seats in the March elections and had been expected to join Netanyahu's Likud in a government comprising six factions.

Lieberman's decision means Netanyahu will have only the slenderest majority of just 61 seats.

- No plans to topple Hamas -

Lieberman, who will step down as foreign minister -- a position he had been expected to retain -- said his departure was related to a dispute over "principles" rather than portfolios.

"Our dilemma was principles," he told reporters, indicating that his party had been promised both the foreign ministry and the immigrant absorption ministry.

"This coalition does not reflect the positions of the Zionist camp, and it is not to our taste, to say the least," he said.

During the negotiations, Lieberman had reportedly laid down a number of far-reaching demands for his agreement to join the coalition, including full responsibility for dialogue with Washington.

He also demanded to take charge of any future peace process, with the proviso that dialogue be conducted on a comprehensive regional basis and not just bilaterally with the Palestinians, public radio said.

Until now, both highly sensitive matters have been exclusively dealt with by Netanyahu's office.

He also demanded that the government adopt as a strategic goal the removal of the Islamist Hamas movement as the de facto power in Gaza.

Speaking on Monday, he said it was clear that the next government had "no intention of overthrowing the Hamas regime".

He also pointed to delays in passing a bill to enshrine in law Israel's status as the Jewish state -- a highly controversial measure which critics say would institutionalise discrimination against the country's Arab minority.

Lieberman has held the foreign affairs portfolio since 2009, except for a period of around a year when he stepped down to successfully fight corruption charges, returning to office in November 2013.
Source: AFP