JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu called off plans on Tuesday for early elections and formed a unity government in a surprise move that could give him a freer hand to confront Iran's nuclear ambitions.
The deal, agreed at a secret meeting overnight, means the centrist Kadima party will hook up with Netanyahu's rightist coalition, creating a wide parliamentary majority of 94 legislators, one of the biggest in Israeli history.
"A broad national unity government is good for security, good for the economy and good for the people of Israel," said a statement from the prime minister's office, quoting Netanyahu.
Environment Minister Gilad Erdan said the accord would help build support for potential action against Iran's atomic programme which Israel views as an existential threat.
"An election wouldn't stop Iran's nuclear programme. When a decision is taken to attack or not, it is better to have a broad political front, that unites the public," he told Israel Radio.
The recently elected head of Kadima, Shaul Mofaz, will be named vice premier in the new government, officials said, adding that the accord would be formally ratified later on Tuesday and presented to parliament.
As deputy prime minister in a former Kadima-headed government in 2008, Mofaz was among the first Israeli officials to publicly moot the possibility of an attack on Iran.
A one time defence minister, the Iranian-born Mofaz has been more circumspect while in the opposition, saying Israel should not hasten to break ranks with war-wary world powers that are trying to pressure Iran through sanctions and negotiations.
Gerald Steinberg, a political scientist at Bar-Ilan University near Tel Aviv, said the coalition deal "sends a very strong signal to Tehran, but also to Europe and the United States, that Israel is united and the leadership is capable of dealing with the threats that are there if and when it becomes necessary."
Israeli officials have said the next year will be crucial in seeing whether Iran is willing to back down in the face of widespread international condemnation and curb its nuclear plans.
Israel has regularly hinted it will strike the Islamic republic if Tehran does not pull back.
Iran regularly dismisses Israeli and Western accusations that it is working on developing a nuclear bomb, saying its programme is focused on generating electricity and other peaceful projects. Israel is widely assumed to have the Middle East's only nuclear arsenal.
The next national election is not due until October 2013 but Netanyahu this month had pushed for an early poll after divisions emerged in his coalition over a new military conscription law. Parliament was preparing for a final vote to dissolve itself and clear the decks for a September 4 ballot while the backroom talks with Kadima were under way.
The accord stunned the political establishment and drew swift condemnation from the centre-left Labour party, which had been touted in opinion polls to be on course for a resurgence at the expense of Kadima.
"This is a pact of cowards and the most contemptible and preposterous zigzag in Israel's political history," Labour party leader Shelly Yachimovich was quoted as saying in the media, where commentators hailed Netanyahu's political prowess.
Kadima, with 28 seats, will add significant weight to the coalition, but it remains uncertain how it will get along with religious and ultra-right parties also in the cabinet.
Inter-government relations are likely to be tested swiftly over the issue of settlement building after the high court ordered the government on Monday to demolish five apartment buildings in a Jewish settlement in the occupied West Bank.
Many of Netanyahu's supporters want him to push through legislation to legalise settlements, such as the Ulpana apartments, which a court has ruled were built on privately owned Palestinian land.
It is not clear if Kadima would support such a move, which would draw international condemnation on Israel. Palestinians say settlement building is jeopardising their chance to create an independent state.
Additional reporting by Ari Rabinovitch; Editing by Crispian Balmer and Andrew Heavens