Labor has been at the forefront of Mideast peace efforts, while Netanyahu has a record of rebuffing peace moves that require Israeli concessions. To entice a reluctant Labor into his coalition, Netanyahu had to promise to pursue peace with the Palestinians, but he stopped short of pledging to work for creation of a Palestinian state - a cornerstone of peace plans for more than a decade.
In the campaign before the Feb. 10 election that propelled him toward the premiership, Netanyahu disparaged talks on a peace treaty, saying the proper approach was to first build up the Palestinian economy.
Palestinian leaders rejected that, and during her visit here this month, US Secretary of State Hillary Rodham Clinton made a point of repeatedly calling for creation of a Palestinian state.
That set up a possible clash between Israel and its most powerful ally, but Netanyahu insists this won't happen and gave an upbeat assessment of the situation in a speech to a joint Israeli-Palestinian economic conference.
Peace is a "common and enduring goal for all Israelis and Israeli governments, mine included," Netanyahu said. "This means I will negotiate with the Palestinian Authority for peace."
He said the Palestinians "should understand that they have in our government a partner for peace, for security, for the rapid development of the Palestinian economy."
In the West Bank, officials in the Western-backed government of President Mahmoud Abbas were skeptical, and spokesman Nabil Abu Rdeneh dismissed Netanyahu's call for economic development. "Any solutions with other slogans and titles are only an attempt to escape the commitments of the peace process," he said, listing the main issues in negotiations for a state: borders, settlements, and Jerusalem.
At a news conference Tuesday, Obama said the makeup of the new Israeli government was still unclear, and peacemaking is "not easier than it was, but I think it's just as necessary."
Besides Labor, Netanyahu's main partner is Yisrael Beitenu. Its leader and designated foreign minister, Avigdor Lieberman, has been denounced for a proposal that could end up stripping Israeli Arabs of their citizenship unless they declare their loyalty to the Jewish state.
