Prime Minister Ariel Sharon (search) on Monday invited the moderate Labor Party into his shaky coalition, and warned rebels in his Likud Party (search) that he'll call early elections if they try to block the partnership.

An alliance with Labor would boost Sharon's plan to withdraw from the Gaza Strip (search) and four isolated West Bank settlements by 2005. Coalition hard-liners have been trying to sabotage a pullback.

Some sticking points remain in coalition negotiations, including wrangling over senior portfolios, particularly the job of foreign minister for Labor chief Shimon Peres (search). However, both sides said they expect a deal quickly.

The main threat to such a union appears to be coming from Likud hard-liners opposed to a Gaza withdrawal and senior Likud ministers who, fearing they'll lose their jobs, have threatened to stir a rebellion in the party.

Sharon warned Likud legislators Monday that he'll call early elections if they make good on their threats.

He told the legislators that he has no choice but to expand the coalition by bringing in Labor. "But if you don't want this or that, we can go to elections, that's the way it is," Sharon said. "I am saying this in the clearest possible way: This situation cannot continue."

The coalition talks were held as U.S. Mideast envoys were in the region to discuss the Gaza withdrawal plan. White House officials Elliot Abrams and Steve Hadley were to meet with Palestinian Prime Minister Ahmed Qureia (search) on Monday and with Sharon on Tuesday, a U.S. Embassy spokesman said.

Sharon and Peres met privately for an hour Monday morning. Both sides said the talks had gone well.

"He gave me a formal invitation to enter into negotiations to create a government including the Labor Party," Peres said at a meeting of Labor lawmakers. The party was expected to accept the invitation on Tuesday, setting the stage for negotiations to begin.

Sharon turned to Labor, which supports the Gaza withdrawal, after facing increasing opposition from far-right coalition partners and hard-liners in Likud. Defections have deprived him of his parliamentary majority.

Many Likud hard-liners still oppose the union. "If the Labor Party enters the coalition it will bring a cancer into the Likud," said Uzi Cohen, a member of the party's powerful Central Committee.

Senior Likud ministers fear for their jobs, particularly Foreign Minister Silvan Shalom. Finance Minister Benjamin Netanyahu also has expressed concern that Labor would hamper his economic reforms.

By September 2005, Sharon plans to withdraw from all of Gaza, where 7,500 Jewish settlers live amid 1.3 million Palestinians, and uproot four isolated settlements in the West Bank.

The withdrawals are part of his "unilateral disengagement" plan, which he says will boost Israel's security and preserve Israel's Jewish character by giving up areas with large Arab populations. Sharon refuses to negotiate directly with the Palestinians.

Peres said Monday that he would make a series of demands before joining the government, including resuming contacts with the Palestinians as the withdrawal proceeds.

Despite their differences, officials from both sides said the main sticking point is what post Peres will fill.

Peres, an 80-year-old former prime minister, wants to return to a position of power, while Sharon needs Labor to carry out the withdrawal.

The two are the last members of Israel's founding generation still active in politics, and have been coalition partners before, despite their political differences.

In other developments Monday, Israeli troops destroyed several buildings on the outskirts of the town of Khan Younis in southern Gaza. The army said it destroyed uninhabited shacks used by militants as cover to fire on Israeli targets.

A 72-year-old Palestinian man who lived alone and was used a wheelchair was buried under the rubble, his family said. Doctors said he died of a heart attack.