The leader of Israel's ruling party, Tzipi Livni, gave up her attempts to form a coalition government, setting the stage for early elections.
That puts opposition leader Benjamin Netanyahu, a critic of the Palestinian peace process, in a strong position to become the country's next prime minister.
Livni has been trying to put together a government since she replaced Prime Minister Ehud Olmert as head of the ruling Kadima party last month. But partners in the current coalition pressed new demands. In a meeting with President Shimon Peres broadcast live, Livni said she would not give in to what she termed political blackmail.