Israeli Prime Minister Benjamin Netanyahu said Sunday it was still possible to strike a deal to form a new coalition government ahead of a Wednesday deadline.
Netanyahu has been unable to reach a deal with potential coalition partners despite results from April 9 elections giving his Likud party and its right-wing and religious allies a majority in parliament.
Speculation has mounted over the possibility of fresh elections, reported AFP.
Negotiations have broken down over legislation aimed at seeing ultra-Orthodox Jews perform mandatory military service like other Jewish Israelis.
"I think that the problem can be solved with good will, if that's what people want," Netanyahu said at the start of a cabinet meeting.
"If there's not a desire, and things are being aimed in a certain direction, it's unfortunate. I don't think the country needs to be dragged to another election, but there might be someone who wants that."
Avigdor Lieberman, who is likely to become defense minister under a coalition deal, has pushed for a guarantee that a bill he backs on ultra-Orthodox military conscription be passed.
The ultra-Orthodox parties have refused to support it.
Netanyahu needs both Lieberman's Yisrael Beitenu party and the ultra-Orthodox to form the coalition he is seeking.
Likud and its allies hold 65 seats in the 120-seat parliament, including Yisrael Beitenu's five and the ultra-Orthodox parties' 16.
A Likud spokesman said Sunday that "if Lieberman continues to insist on taking down the government, the Likud has begun preparations ahead of elections."
But he added: "At this stage there has been no decision on dissolving the Knesset (parliament)."
Thousands also protested on Saturday night against Netanyahu's reported attempts to seek immunity from prosecution as part of coalition negotiations.
Netanyahu faces potential indictment for bribery, fraud and breach of trust in the months ahead.
