JERUSALEM (Reuters) -- Israel faced deep political uncertainty on February 11 after its election ended with clashing claims of victory by centrist Foreign Minister Tzipi Livni and hawkish rival Benjamin Netanyahu.
"I won," read the headline of Israel's biggest newspaper, Yedioth Ahronoth, next to photos of both. It will be up to President Shimon Peres to decide, after hearing recommendations from political parties, whether to ask Livni or Netanyahu to try to form a coalition. Israeli media said he would have no choice but to invite Netanyahu to lead a government if rightist parties, which hold a parliamentary majority, recommend the Likud leader over Livni.
But it would be the first time in Israel's 60-year history that the party that won the most parliamentary seats in an election did not get a chance to form the government.
Nearly final results gave Livni's Kadima party 28 seats to 27 for Netanyahu's right-wing Likud in the 120-member Knesset. She said she would become prime minister and invited him to join a "unity government."
Netanyahu, pointing to what he called a large "nationalist camp" in parliament, said he would head a coalition government, comprised of rightist parties.
"With God's help I will lead the next government," Netanyahu, 59, told Likud supporters.
The right-wing bloc of parties together have 64 seats. But Livni, 50, told jeering supporters: "The Israeli public can smile again when we form the government." She would be Israel's first woman leader since Golda Meir in the 1970s.
"Tzipi Livni has only the slightest chance, or none at all, of forming a government under her leadership," Abraham Diskin, a political scientist at Jerusalem's Hebrew University, told Israel Radio.
"The bottom line is that there's a good chance that a Likud-led government, with Kadima's participation, will be established," he said.
The overall rightward shift in the Knesset will, in any case, dent hopes in U.S. President Barack Obama's administration for an Israeli coalition that can move towards peace with the Palestinians and other Arab neighbours after last month's war in the Gaza Strip.
Peres's discussions with Knesset factions could take about a week and coalition talks could drag on for more than a month. Avigdor Lieberman, whose far-right Yisrael Beiteinu party, surged into third place on its anti-Arab rhetoric, emerged as a potential kingmaker.
He said he was leaving his options open, indicating he could choose to join a Likud or a Kadima-led government. But he also said he preferred a "nationalist" government.
Ehud Olmert of Kadima, who resigned in September in a corruption scandal but stayed on as caretaker prime minister, will remain in the post until a government is in place.
Olmert will oversee processes such as the consolidation of a truce that ended the recent Gaza war against Hamas militants. Whoever Peres taps will have 42 days to build a government.
Israel's president traditionally picks the leader of the party that wins the most votes, but he is not legally bound to do so. Defense Minister Ehud Barak's long-dominant, center-left Labor party was cut down to fourth place behind Kadima, Likud and Yisrael Beiteinu, an upstart ultranationalist party catering
mainly to immigrants from the former Soviet Union.
Netanyahu was cruising to victory until Olmert's centre-left coalition launched a three-week offensive in Gaza. It won massive popular support in Israel despite international outcry over the 1,300 Palestinians killed in the Hamas-ruled enclave.
Some political analysts said Netanyahu had been too complacent, enabling Kadima to catch up, while Livni, a former Mossad spy and corporate lawyer, gained in popularity. Livni led peace talks with the Palestinians on a two-state solution, which stalled last year but which Obama wants to resume.
Netanyahu is cooler on ceding occupied territory to Palestinians and is more likely to resist U.S. demands to curb settlement expansion in the West Bank.
During his three years in office to 1999, the U.S.-educated Netanyahu had strained relations with the last Democratic president, Bill Clinton, and Washington analysts believe a Livni administration would be favored by the White House.
However, her hands would still be tied by right-wing parties.