"The Knesset will convene on Thursday to vote on the new government's guidelines and to swear it in," a parliamentary official said as coalition deals reached by Olmert's Kadima party and the policy points were filed in the legislature.

Olmert's governing coalition will control at least 67 seats in the 120-seat chamber, a majority narrower than he had sought in weeks of negotiations with political parties.

He was forced to seek partnerships with centre-left Labour, the ultra-Orthodox Shas faction and a pensioners' party, after centrist Kadima led the pack in the March 28 election but fell short of a parliamentary majority.

Olmert has pledged, in the absence of peace talks with the Palestinians, to dismantle isolated West Bank settlements, bolster main settlement blocs and set Israel's borders by 2010.

Palestinians have said such moves, described by Olmert as "convergence", would annex land they want for a state of their own in the West Bank as well as the Gaza Strip, which Israel quit last year.

Elder statesman

Handing out cabinet portfolios to Kadima's senior members, Olmert picked 82-year-old Shimon Peres as one of his deputies and named him minister of regional development.

"Peres will be the government's elder statesman, to be sent on special missions to the Arab world and European nations," said a senior official in Kadima, which Peres joined after losing a Labour Party leadership election.

Foreign Minister Tzipi Livni, widely seen as a rising star in Israeli politics and a former operative of Israel's Mossad spy agency, will remain at her post.

Shaul Mofaz (R) will lose the defense
portfolio to Amir Peretz (file photo)

The defence minister, Shaul Mofaz, did not fare as well. He will serve as one of Olmert's deputies and as transport minister but hand over the defence portfolio to Labour leader Amir Peretz, a former trade union chief.

Palestinians regard Mofaz as one of Israel's most hardline leaders, citing tough measures he has overseen - including assassinations of top militants and tight travel restrictions - to battle anti-Israeli violence.

Former mayor

Olmert became interim prime minister after Ariel Sharon suffered a stroke and fell into a coma in January.

Olmert, a former Jerusalem mayor, has said he will wait, but not for long, for Hamas, now leading the Palestinian government, to show whether it will moderate its position calling for Israel's destruction and become a peace partner.

Peace prospects appear dim as Hamas has defied Israeli and international demands to renounce violence, recognise Israel and accept previous interim peace deals.

In another key cabinet appointment, Abraham Hirschson, a close Olmert ally and currently minister of tourism and communications, was named finance minister. He is expected to continue pursuing budget discipline and free-market policies.

Labour will hold seven cabinet posts, the pensioners' party two, and Shas three.