Defense Minister Ehud Barak's Labor party is "on the way to" joining a new coalition headed by new Kadima leader Tzipi Livni, senior sources in Labor told Army Radio Tuesday afternoon ahead of a second meeting between the two that is slated to take place in the coming days.

Barak himself hinted as much Tuesday when he declared that his party would continue to lead the country.

"We will do what is right for the state of Israel," Barak said in reference to the negotiations with Kadima. "The Labor party under my leadership will continue to show responsibility and lead processes… in diplomatic-security issues, economic issues and political issues."

The hostility between Livni and Barak subsided late Sunday night after the two met in a positive atmosphere and agreed to make a serious effort to form a new government.

Barak's associates said he sought and received a commitment from Livni that she would form a stable coalition that would last for more than just a few months and that any decision on a date for a general election would be coordinated between Labor and Kadima.

Meanwhile, the Livni met with the leader of another prospective coalition partner, Shas chairman Eli Yishai. The two discussed Shas's conditions for joining the government, including the deferral of the Jerusalem issue in talks with the Palestinians and raising child-support stipends.

Yishai reportedly asked Livni to ensure government assistance in funding housing for young couples and the two agreed that professionals from both Shas and Kadima would exchange views and form a common groundwork for the negotiations.

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