Jerusalem - Israel Foreign Minister Tzipi Livni postponed by several hours a scheduled meeting with President Shimon Peres Sunday, fueling speculation of last minute negotiations to resolve an impasse which had prevented the formation of a new coalition government.

Livni, who had been scheduled to arrive at Peres' Jerusalem residence at 2 pm, (1200 GMT) received a telephone call from Knesset Speaker Dalia Itzik asking her to wait a few hours, according to media reports because Peres had decided to mediate between Livni and her prospective coalition partners.

Livni had been expected to recommend that Peres call for new elections as she had failed to form a new governing coalition. She was now slated to meet Peres at 1500 GMT.

The foreign minister, tasked by Peres on September 22 with forming a new coalition, apparently decided on Saturday night to recommend new elections, after two ultra-Orthodox parties ruled out sitting in a new coalition since she had not met their demands.

She said she was "at peace" with the decision, the YNet news site reported Sunday morning.

"I decided not to give in, and this is what the president will hear from me," she added, in response to demands that she raise child allowance benefits and give a commitment that she would not negotiate the future of Jerusalem.

"I was faced with impossible demands and I had to put a stop to it. I was willing to show my respect and allot budgets for goals I could agree with, but when it turned out the coalition talks were used as grounds for illegitimate demands and extortion, I decided to put a stop to it," YNet quoted her as telling her Kadima faction before Sunday's weekly cabinet meeting.

The Jerusalem Post daily quoted her as telling advisors Saturday night that "I'm sick of this extortion."

Once informed officially by Livni that she cannot form a government, Peres can either decide to entrust the task to another legislator, or else call for new elections to be held within 90 days.

Livni, replaced interim Premier Ehud Olmert as leader of the ruling Kadima party on September 17.

Although she managed to sign a new agreement with the Labour Party, Kadima's current main coalition partner, negotiations with another crucial coalition faction, the ultra-Orthodox Shas, failed to make progress.

Livni adamantly refused Shas' demand to allocate an extra 1.5 billion Israeli shekels (some 400 million dollars) in the 2009 budget for child allowances.

She also nixed a demand by the party, whose electorate is made up of mainly of religious, hawkish lower-income voters, to commit that she would not discuss the future of Jerusalem in her talks with the Palestinians.

Shas announced Friday it would not be joining a Livni-led coalition, and on Saturday night a smaller ultra-Orthodox faction, whose support Livni needed to form a narrow coalition, also announced that it would not join her coalition. dpa