Tel Aviv  - Near-final results of Israel's election showed the centrist Kadima party of Foreign Minister Tzipi Livni narrowly edging out the hardline Likud party of former premier Benjamin Netanyahu, but right-wing parties still scored enough mandates to prevent her from putting together a stable coalition.

With 98 per cent of the votes counted by early Wednesday morning, Kadima had a predicted 28 mandates in the 120-seat Knesset, with the Likud close behind with a projected 27.

The right-wing block headed by the Likud was forecast to garner 64 to 65 seats, enough to enable Netanyahu to declare to supporters that he would be the next premier, after exit polls broadcast on Israel's three television channels showed Likud trailing Kadima by only two seats.

But Livni, in a speech to her cheering supporters, said the results showed that Kadima had won the election, and called on Netanyahu to serve under her in a government of national unity.

Under Israeli law, President Shimon Peres has first to consult with all parties elected to the Knesset as to their choice for prime minister, before entrusting the task to the candidate which the discussions have shown has the best chance of forming a government.

Perhaps the biggest surprise of the entire election campaign was the ultra-nationalist Israel Beiteinu party of Soviet-born Avigdor Lieberman, which the near-final results showed would become the third-largest party in parliament, with 15 seats, fewer than predicted in pre-election surveys, but enough to play a central role in any coalition negotiations.

The Labour Party of Defence Minister Ehud Barak was forecast to slip into fourth place for the first time in Israeli history. The left-wing party has always either led the country or served in coalition or opposition as the second-largest party.

The ultra-Orthodox Shas party, often a coalition maker or breaker, was predicted to win 11 mandates, one less than the 12 it held going into the election.

The close results prompted both a smiling Netanyahu and a beaming Livni to declare victory - in addition to a triumphant Lieberman, who declared he held "the key" to any new coalition and was quick to list hawkish conditions for joining any government.

Netanyahu, a hardline former premier who has pledged to topple the Hamas regime in Gaza if elected and who led in opinion polls throughout nearly the entire campaign, shrugged off the narrow gap behind Kadima and declared that he would lead the next government.

The Likud has more than doubled its mandates, and the broader right-wing bloc has grown from a minority in the outgoing Knesset to a majority, he noted.

That "has one clear meaning, that the people want change. The people want to travel a new path. Our path has won, and we will be the path that will lead the nation," he declared in Tel Aviv to hundreds of supporters chanting his nickname, "Bibi! Bibi!"

The strength of the Likud-led right-wing bloc, even if Kadima maintains a lead, severely limits Livni's options in forming a government and makes her dependent on either Netanyahu or Lieberman.

That did not prevent her from declaring: "We won today."

"All those who left their homes today gave their faith to us, to Kadima, and those are the clear results of this evening," she said, urging Netanyahu to join a government of a national unity that she would lead.

If both Livni and Netanyahu fail to form a coalition, a rotation agreement that would see both take turns as prime minister could be put in place.

Lieberman told cheering supporters n Jerusalem that he will only join a coalition that pledges to remove the Hamas regime in Gaza.

Indicating a clear preference for Netanyahu, he said he wants a right-wing government that would discontinue the policies of the current Kadima-led coalition.

"We must topple the Hamas regime," he said, rejecting any attempt to reach a new truce with the militant Islamic movement ruling Gaza. "No truce with Hamas, no negotiations with Hamas, direct or indirect."

A clearly-distraught Barak, the first to address his supporters after exit polls were published following the closing of polling stations at 10 pm Tuesday (2000 GMT), nevertheless said he would continue to lead the party.

A top aide of Palestinian President Mahmoud Abbas, Saeb Erekat, voiced concern that the close results and shift to the right would create a "state of paralysis" in Israel, in which no new government "regardless of its structure, will be able to advance peace on the Palestinian or Syrian tracks."

"Any coalition government that rejects the two-state solution, continues with settlement activities and refuses signed agreements is not going to be a partner for us in peace," Erekat warned on the al- Jazeera satellite channel from Amman.

A Hamas spokesman in Gaza, Fawzi Barhoum, said that three "heads of radicalism and terror" - Livni, Netanyahu and Lieberman, had emerged as the winners of the Israel elections.

Despite widely expressed apathy, strong winds and intermittent downpours, voter turnout stood at 65.2 per cent, higher than expected and higher than in the last Israeli elections of March 2006.

The one-issue Pensioners Party, which won seven seats in the last elections and had been a desirable coalition partner, stood out as the one faction in the current Knesset that likely failed to reach the 2-per-cent threshold needed for entry.

A small Arab faction, Balad, which has three mandates in the outgoing House but also feared dropping out of Parliament, apparently survived.

Analysts said that the sharp gains for Lieberman in pre-election surveys had prompted more Arab Israelis to turn out to vote, after many had initially said they would boycott the election in protest of Israel's recent Gaza offensive. (dpa)