Former Israel army chief Shaul Mofaz, who led major offensives against Palestinian militants and has called for the ouster of Yasser Arafat, is reported to have accepted Prime Minister Ariel Sharon's offer to serve as his new defense minister. The appointment which comes as Mr. Sharon tries to form a new government following the collapse Wednesday of his 20-month coalition with the center-left Labor Party.

The Defense post became vacant when Labor leader Binyamin Ben-Eliezer resigned. The remaining Labor members in the government followed suit and that marked the end of what was called the government of national unity.

The coalition collapse left Mr. Sharon six votes short of the 61 needed for a parliamentary majority.

He says he is determined to form a new government that will serve out its full three year term which runs until the end of October of 2003.

Without Labor participation Mr. Sharon must turn to smaller right-wing parties. Top of the list is the National Union-Yisrael Beiteinu Alliance even though its chairman, Avigdor Lieberman, says his party has no interest in joining the government.

The prime minister's other option would be to call for early elections but he has made it clear he wants to avoid that.

He was quoted in Thursday's edition of the Yediot Ahranot newspapers a saying he plans "to make every effort to establish an alternative government." "I have no intention of ... initiating early elections," he said.

The center-left Labor Party pulled out of the Sharon government after Labor objected to the amount of money budgeted to support Jewish settlements in the occupied territories. Labor Party leader and Defense Minister Binyamin Ben-Eliezer resigned after a stormy three-hour negotiating session with the prime minister. Foreign Minister Shimon Peres and other Labor Party cabinet ministers also handed in their resignations, which take effect Friday night.

The proposed budget was passed on its first reading on Wednesday by a 67 -45 vote. There will be two more votes on the proposed budget before it is finally approved. Under Israeli law a budget must be passed by the parliament by the end of the calendar year.