Israel has moved a step closer to the creation of a moderate, new government.  An ambitious plan to draw Israel's final borders by 2010 is topping the agenda.

Ehud Olmert

Interim Prime Minister Ehud Olmert's centrist Kadima Party and the Dovish Labor party have signed a coalition agreement. It includes a pledge to withdraw from large parts of the West Bank over the next four years. Under Mr. Olmert's plan, about 70,000 Jewish settlers would be removed from their homes.  At the same time, Israel would annex big West Bank settlement blocs.

Mr. Olmert says he would prefer to do this as part of an agreement with the Palestinians.  But he believes that is impossible because the Islamic militant group Hamas, which seeks Israel's destruction, now heads the Palestinian Authority.

Mr. Olmert says if there is no Palestinian peace partner, Israel will withdraw unilaterally.

"We will have to act on the basis of a broad national consensus in Israel and work towards fixing of the permanent border lines even without an agreement."

Former Palestinian legislator Sabri Saddam says expanding settlements and annexing land will only bring more conflict.

"The unilateral withdrawal is not a solution at all but rather a false disengagement," he said.  "What we're looking for is a final, just and fair peace."

In addition to Palestinian opposition, Mr. Olmert faces another obstacle to implementing the pullout plan. His coalition with Labor does not give him a majority in the 120-member Knesset or parliament.  Therefore, he will have to bring the ultra-Orthodox Shas party into the coalition, and Shas opposes the pullout plan. Analysts say the government could collapse in two or three years, when the time comes to remove tens of thousands settlers from their homes.