Israel's next government will be "more Jewish and more Zionist", the confident faction leader of the right-wing National Union party declared Thursday, following coalition talks with members of Prime Minister-designate Benjamin Netanyahu's Likud party.

"There was very positive atmosphere at the meeting [with Netanyahu]," said Yaakov Katz, as he emerged from the talks at Kfar Maccabiah in central Israel. "...There is an understanding with Likud that the next government will be more Jewish and more Zionist."

Netanyahu, who was tapped to form the next government following national elections two weeks ago, initially turned to mainstream Kadima and Labor, but was rebuffed. Some Kadima members are, however, rebelling against party leader Tzipi Livni's determination to sit in opposition, and urging her to join a Likud-led coalition.

But a senior member of Likud said Thursday that differences over Palestinian statehood are likely to scupper Netanyahu's efforts to forge a broad government with Livni.

"There is across-the-board agreement on Iran, Hezbollah and Hamas but there is a big gap between Kadima and Likud on the two states for two people. It's unsolvable," Silvan Shalom, a senior Likud legislator and former foreign minister, told Army Radio.

Netanyahu plans to meet Livni on Friday in another attempt to recruit Kadima. He wants to shift the focus of U.S.-sponsored peace talks from thorny territorial issues that would set the boundaries of a state to shoring up the Palestinian economy.

Netanyahu has said any Palestinian state must have only limited sovereignty and be demilitarized.

Livni has said Kadima would not join a government that does not commit clearly to a two-state solution to the Israeli-Palestinian conflict.

As Israel's chief negotiator with the Palestinians in the outgoing government, Livni has been at the forefront of a land-for-peace process whose declared aims are to achieve a viable Palestinian state and security for Israel.

"Unfortunately the answers we are receiving from Kadima leaders is that there is no chance of her changing her position. And it seems that tomorrow she will say a final 'no'," Silvan Shalom told Army Radio.

Asked about Shalom's remarks, a Kadima spokeswoman said Livni's position was unchanged.