Prime Minister Benjamin Netanyahu on Tuesday struck a surprise deal with the opposition Kadima party to form what will be Israel´s largest-ever coalition government, axing plans for a snap election.

The agreement to form what will be Israel´s seventh national unity government was to be put to a vote in the Knesset later on Tuesday, officials said.

The move puts Netanyahu at the helm of a ruling coalition with 94 votes in the 120-seat parliament, the largest-ever majority for a government in Israel.

Under the agreement, Shaul Mofaz, who took over leadership of the centre-right Kadima party only six weeks ago, would become vice prime minister as well as a minister within the premier´s office, a draft of the deal showed.

The two men negotiated the the 11th-hour deal as the Knesset was voting on a motion to end its current session to clear the way for early elections this September rather than October 2013 as scheduled.

Speaking at a joint news conference with Mofaz, Netanyahu said the agreement would give greater stability to the coalition, which is led by his rightwing Likud party.

"When I saw I could form a broad coalition, I realised I could return the stability without going to elections," he said.

Mofaz said Kadima´s decision to remain in opposition for the past three years was "a historic mistake." "Today we are correcting it," he said.

Over past months, Mofaz has launched several attacks on Netanyahu, notably accusing him and his Defence Minister Ehud Barak of manipulating the threat of a nuclear Iran to score political points and scare the Israeli public.

Asked about the differences between his view on Iran and that of Mofaz, Netanyahu said the issue would be handled in a "serious and responsible" manner.

"Certainly one of the most important issues is the Iranian issue," he said.

Under the deal, Kadima and Likud will by the end of July replace a contentious law that allowed ultra-Orthodox Jews to defer their military service, with new legislation that would ensure a "fair" sharing of the burden of army service.

They will also change the system of government by the end of 2012. And Kadima MPs will take charge of three Knesset committees, including the prestigious foreign and defence committee currently headed by Mofaz.

The deal also involves a commitment to renew the peace process, with Netanyahu saying he hoped the establishment of a new government would encourage the Palestinians back to the negotiating table after a hiatus of more than 20 months.

Mofaz said Israel should "negotiate with the Palestinians to achieve an interim agreement before a permanent agreement."

For his part, Abbas called on the new government "to seize the occasion of the enlargement of the coalition to speed up the achievement of a peace deal with the Palestinian people and their leaders."

But in Gaza, the political advisor to Hamas prime minister Ismail Haniya called the coalition a "threat."

"The formation of the national unity Israeli government represents a grave threat to the Gaza Strip and strikes a blow to Abbas´s project of negotiations," Yusef al-Rizq said.

News of a new unity government was welcomed by the ultra-nationalist Yisrael Beitenu party, which is a key player in Netanyahu´s coalition, but it warned "the real test" would be the new law on drafting the ultra-Orthodox.

President Shimon Peres also welcomed the move, saying a national unity government would be good for Israel "in light of the crucial challenges facing it."

But Labour party chief Shelly Yachimovich blasted the deal as a "pact of cowards."

"This is the most ridiculous zigzag in the history of Israeli politics," she wrote on her Facebook page.

"With this final burial of Kadima, we have received a rare and important opportunity to lead the opposition, and will do so with energy and faith."

And Zehava Galon, leader of the leftwing Meretz party, said the fact Netanyahu would have the backing of 94 MPs meant it would be "almost a dictatorship" that would allow him to pass "almost any law he wants."

The deal is a political coup not just for Netanyahu but also for Mofaz, an Iranian-born former general and one-time military chief-of- staff who took over Kadima following faction primaries on March 28.

Although Kadima emerged as the largest party in parliament following the 2009 elections -- taking 28 seats -- it failed to form a government, and polls have suggested it stood to lose up to half them in any new election. (Copyright © 2012 Agence France Presse. 05/08/12)