"In the coming period we will move to set the final borders of the state of Israel, a Jewish state with a Jewish majority," the acting Israeli prime minister said in a speech to supporters of his centrist Kadima party early on Wednesday.

His comments came as he declared victory in Tuesday's general election.
 
"Israeli democracy has spoken clearly," he said. "Israel wants Kadima."

With almost all votes counted Kadima looks set to secure 28 seats in the 120-seat parliament, making it the largest party but returning a weaker-than-expected performance.

Party members had been hoping to win as many as 35 seats, while during the campaign some opinion polls had shown it winning as many as 44 seats.

In his speech Olmert renewed his call for peace talks with the Palestinians and said he was prepared to make painful compromises, such as uprooting some Jewish settlements in the West Bank.

But he warned that Israel would act on its own if it can't reach a peace deal.

"We are ready to compromise, to give up parts of the beloved Land of Israel"

Ehud Olmert
Acting Israeli prime minister

This scenario appears increasingly likely following the victory by Hamas' in January's Palestinian legislative elections.
 
The new Hamas government, which rejects peace talks, was set to be sworn into office late Wednesday.

Olmert's unilateral approach was seen as appealing to many Israelis worn down by a five-year-old Palestinian uprising and concerned by Hamas's rise to power.

However, Palestinians say such unilateral moves, including tracing a border along a fortified separation barrier Israel is building inside the West Bank, would deny them a viable state.

"We want negotiations and not to dictate unilateral solutions"

Mahmoud Abbas,
Palestinian Prime Minister

In his victory speech Olmert appealed to Mahmoud Abbas, the Palestinian president, saying Jews had aspired for thousands of years to create a homeland throughout the Land of Israel, biblical territory that includes the West Bank.

"But acknowledging reality and circumstances, we are ready to compromise, to give up parts of the beloved Land of Israel ... and evacuate, with great pain, Jews living there, to create the conditions that will enable you to fulfil your dream and live alongside us," he said.

If the Palestinians did not move towards peace, he said, "Israel will take its destiny in hand" and set permanent borders after lobbying the United States and others for support.

Hamas itself was swift to condemn Olmert's unilateral approach, describing it as "a clear threat."

"He has his own plan, and he wants to implement it, whether we accept it or not," said Nasser Ashar, Hamas' deputy prime minister.
 
Negotiations call

Abbas meanwhile urged Israel to return to the negotiating table.
 
"We want negotiations and not to dictate unilateral solutions," he said at a summit of Arab leaders in Khartoum, Sudan.

Other summit participants voiced similar calls. "It is absolutely out of the question to accept ... unilateral withdrawals according to Israeli whims," said Amr Moussa, secretary-general of the Arab League.

As moves to build a new I sraeli coalition got underway, Kadima officials said they were confident of broad backing from other parties, putting a government in place after the Jewish holiday of Passover, which begins in mid-April, and finalising Israel's withdrawal plan within a year.

Olmert celebrates Kadima's  poll
victory with Shimon Peres

"I believe we will have more than 70 legislators who will support the disengagement plan," Haim Ramon, a senior Kadima member, told Israeli radio.

Following Tuesday's vote, the centre-left Labour party is the second largest party in parliament with 20 seats, followed by the ultra-Orthodox Shas with 13, the nationalist Yisrael Beiteinu with 12 and right-wing Likud with 11.

The results were seen as a sharp setback for Benyamin Netanyahu, Likud's leader and a former prime minister.

Netanyahu pledged to stay on as Likud chief, a post he regained only three months ago after Ariel Sharon, the then prime minister, left the party amid an internal revolt over Israel's pullout from settlements in Gaza.
 
Quitting Likud, Sharon founded Kadima before suffering a stroke on January 4, from which he remains in a coma.