Two weeks after Israeli elections, negotiations on forming a moderate national unity government have failed to achieve a breakthrough.

Israel's hawkish Prime Minister-designate Benjamin Netanyahu met with his moderate rival, Foreign Minister Tzipi Livni, but failed to persuade her to bring her Kadima party into a government headed by him. Livni, who has served as chief negotiator with the Palestinians, said Mr. Netanyahu refused to endorse the principle of "two states for two peoples."

This meeting has ended without agreements on issues that I see as substantial, Livni said.

Mr. Netanyahu opposes the creation of a Palestinian state on grounds that it would threaten Israel's security, but he said he is ready to compromise for the sake of unity.

Mr. Netanyahu said he intends to continue peace talks with the Palestinians, though he did not elaborate on what approach he would take. He said a broad unity government is necessary to confront the serious security and economic challenges facing Israel. He specified the growing nuclear threat from Iran.

Without Livni, Mr. Netanyahu may have no choice but to form a right-wing government with smaller parties that support settlement expansion in the West Bank and oppose territorial concessions to the Palestinians. 

While Mr. Netanyahu may sympathize with those views, that is not the government he wants because it could put Israel on a collision course with the United States, which is hoping to help Israel and the Palestinians forge a peace agreement.