Israeli premier Benjamin Netanyahu, stung by a centrist electoral surge, pledged Wednesday to seek a broad coalition focused on socio-economic issues but faced new international pressure on the peace process.
After a bruising election that saw the centrist Yesh Atid party win a surprise second place, Netanyahu said the Israeli electorate had sent a "clear message".
"The Israeli public wants me... to put together a government which will include three big changes internally: a greater sharing of the burden (of military service), affordable housing and changes in the system of government," he said in brief remarks broadcast on Wednesday afternoon.
Netanyahu's rightwing Likud won 31 seats on a joint list with the hardline nationalist Yisrael Beitenu of ex-foreign minister Avigdor Lieberman, but the Yesh Atid party, led by former journalist Yair Lapid, claimed second place.
In a nod to the shock showing, Netanyahu said on Tuesday night he would try to form "a government which is as broad as possible" amd told Lapid "we have an opportunity to do great things for Israel."
Lapid also called for a broad government, which he said would "include moderate elements from the left and the right to bring about real change," and indicated on Wednesday night he he would cooperate in building a new coalition.
"I've heard talk of an (anti-Netanyahu) bloc," Lapid said. "I suggest removing that from the table. There will not be a bloc; that will not happen."
He expressed satisfaction with hearing the "prime minister take on board everything we have been saying for the past year about equality and the need to protect the middle class and help it with housing and education."
"The outcome of the election is clear: we must work together," Lapid said.
Yesh Atid's performance, just nine months after its creation, has turned Lapid into Israel's newest political star.
But it is a blow for Netanyahu, who had sought a bullet-proof rightwing majority that would give him freedom to manoeuvre on key foreign policy issues including Iran's nuclear programme and peace with the Palestinians.
Signup to our newsletter and follow us on Facebook and Twitter!
Lapid's campaign emphasised economic reform and universal military service, but his party also favours negotiations with the Palestinians, and could force Netanyahu to moderate his economic policy and take a new line on peace talks.
Coalition negotiations are expected to be delicate, particularly as the Knesset's 120 seats are evenly split between the rightwing and centre-left blocs, and Netanyahu is likely to reach across the aisle to Lapid.
"There is no reasonable government -- meaning none that Netanyahu could head without becoming an international pariah -- without Lapid," analyst Yossi Vertner wrote in the Haaretz daily.
Netanyahu has said the new government's top priority will be preventing Iran from obtaining nuclear weapons, but domestic challenges will be no less pressing.
Taming a larger-than-expected deficit will also be a priority, but it may be hard for parties like Yesh Atid, which campaigned on the plight of the middle class, to stomach tough austerity measures.
Israel has come under increasing pressure to seek renewed negotiations with the Palestinians, with French Foreign Minister Laurent Fabius repeating that call on Wednesday.
But the Palestinians expressed caution over Lapid's showing.
"I don't see a peace coalition or a peace camp emerging now and revitalising itself," Palestine Liberation Organisation official Hanan Ashrawi told reporters.
The White House congratulated Israel on the election, and said President Barack Obama was likely to soon call Netanyahu, with whom he has a complicated relationship.
Spokesman Jay Carney reiterated that Washington wanted to see direct talks between the two sides.
"We believe that what needs to take place is direct negotiations between the two parties that address the final-status issues and that result in a two-state solution that provides the sovereignty that the Palestinian people deserve and the security that the Israeli people and Israel deserve," he said.