Tzipi Livni said she will decide by Sunday whether to form a new government or call for new elections.
The prime minister-designate initialed a coalition agreement with the Labor Party last week but has had difficulty forming a broad-based coalition or it appears a narrow coalition with outside support.
"My tendency in the wake of the primaries was to go to general elections, yet I thought it would be appropriate to form a stable government," Livni said Thursday at the beginning of a faction meeting.
Livni has been unable to come to an agreement with the religious Shas Party despite offering about a $259 million increase in child welfare increases on Wednesday. On Thursday, the Pensioners’ Party canceled a scheduled meeting with negotiators from Livni’s Kadima Party.
Elections must take place within 90 days of Livni informing President Shimon Peres that she could not form a new government coalition.