Israeli Foreign Minister and Kadima party Leader Tzipi Livni speaks during a faction meeting in the Knesset, Israel's parliament in Jerusalem, on Monday. (Sebastian Scheiner/Associated Press)

Israel is heading for a period of political turmoil after prime minister-designate Tzipi Livni gave up efforts to form a new coalition government Sunday.

Her decision, which was widely expected, means the country is heading for parliamentary elections, probably early in 2009.

Livni, who took over the ruling coalition headed by her Kadima party in September, could not come to terms with the ultra-Orthodox Shas party, which said Friday it would not back a Livni-led coalition.

Israeli TV broadcast live Livni's meeting with President Shimon Peres, during which she said "we'll go to elections." Peres must set an election date.

Peace talks could end

Recent polls indicate that the hawkish Likud party, headed by former prime minister Benjamin Netanyahu, would win an election if it was held immediately.

Netanyahu has said he would not continue peace negotiations with the Palestinians. Livni has been Israel's top negotiator, although both the Israelis and Palestinians have acknowledged that the deadline for a deal this year is not realistic.

Palestinians are concerned about the talks.

"Time is precious. The next few months will be wasted because of new elections and the U.S. elections," said Nabil Abu Rdeneh, an aide to Palestinian President Mahmoud Abbas.

A spokesman for the militant group Hamas, which controls the Gaza Strip, said the failure to form a government "is a slap in the face to those who still dream of negotiations." Hamas, which rejects Israel's right to exist, has criticized Abbas for negotiating with Israel.

Livni replaced former prime minister Ehud Olmert in September, when he resigned because of corruption allegations. Olmert has been a peace proponent, suggesting that Israel would have to give up the West Bank and east Jerusalem to meet Palestinian demands.

He also said Israel would have to give the Golan Heights back to Syria to make peace with that country. Israel captured the land in the 1967 war, and has been holding unofficial peace talks with Syria since mid-2007.

Both peace initiatives could fail in the runup to the election, but the CBC's Peter Armstrong, reporting from Israel, said there was talk that Olmert might try and push the deals through before the election.

Olmert is still formally prime minister. Livni would only take over if she could form a government.

With files from the Associated Press