Israeli parties agree coalition

Both leaders are keen to quit Gaza

Israel's ruling Likud Party and the opposition Labour Party have reached an agreement to form a new coalition government, officials say.

Final details are to be worked out at a meeting on Saturday, a spokesman for Labour Party leader Shimon Peres said.

The deal would give the party eight ministerial posts and make Mr Peres deputy prime minister, he added.

The agreement should help PM Ariel Sharon to push through his plan to withdraw Jewish settlers from Gaza.

"An agreement was reached, with just a few more details that need to be worked out," spokesman Yoram Dori told the Associated Press.

An agreement was reached Yoram Dori, Labour leader spokesman Israel 'determined' on Gaza Q&A: Gaza plan

"Tomorrow they will conclude the agreement."

The deal still has to be given formal approval by senior Labour Party members.

Gaza plan

The agreement follows an impasse in the talks earlier this week, over the state budget.

Mr Sharon needs Labour support to avoid early elections.

The prime minister invited the party to join his cabinet when he lost his parliamentary majority after sacking members of the Shinui party who voted against the budget.

Mr Sharon's plan for Gaza has proved very controversial with groups including his own centre-right Likud party, but Labour has backed the plan.

The proposal would see Israel remove thousands of Jewish settlers - and the troops that protect them - from the Gaza Strip.

Israel will maintain control of the borders, coastline and airspace of Gaza, which it has occupied since 1967.

Labour supports disengagement, hoping it can be turned from a unilateral move into an integral part of a new peace process.

Mr Peres has held numerous cabinet posts over the years - most recently serving as Mr Sharon's foreign minister in the last national unity government in 2001-2.