"Just as I cannot accept vague statements, neither can the world. This is a matter of principle, not semantics," she said.

"Unfortunately, I did not find commitment from Netanyahu to move these issues forward in a real and honest way and to commit to them now," she said.

"And thus this meeting has ended without agreement on the matters which to my mind are fundamental in order for us to join any government and this, in my eyes, is the real unity."

Moderate loss

Netanyahu had pushed for a broad-based coalition that now, without the moderate Kadima, is likely to be a narrow coalition of right-wing and religious parties.

He said that he offered Livni a generous partnership and intended to promote the diplomatic process with the Palestinians.

"Unfortunately, I found Mrs Livni rejects unity completely," Netanyahu said.

"I even discovered rejection to form combined teams for deliberations, in order to find that shared way that I am convinced we can achieve.

"Unfortunately, I did not find willingness for unity from Mrs Livni in this critical period for the country."

Coalition vulnerability

It was the second set of talks between the two parties since elections on February 10.

Kadima won that poll by one vote over Likud, but the greater general weight of support for rightwing legislators meant that Netanyahu was given a mandate by Shimon Peres, the president, to form a coalition government.

Netanyahu now has five weeks to form the coalition, which is likely to give him a 65-seat majority in a 120-seat parliament.

However, the low margin of the majority means that any of his partners could break up the government on the event of a dispute.

Any agreement by Netanyahu to relax policy in relation to Palestine with Livni would have upset the more hawkish political parties whose support the Likud leader needs.

A rightwing coalition may cause friction with US president Barack Obama's new administration.

Obama has promised to become "aggressively" involved in achieving peace in the Middle East.