- The reported deal is reached early Tuesday morning
- The deal comes as Netanyahu called for early elections
- It may also change Israel's stance with Iran
Jerusalem (CNN) -- Israeli Prime Minister Benjamin Netanyahu and his right-wing Likud party have agreed to form a unity government with the rival centrist political faction Kadima in a move that would put off elections until next year.
The deal was reached early Tuesday morning, a day after Netanyahu had publicly called for early elections to be held September 4.
Israeli President Shimon Peres, who is traveling in Canada, welcomed the news and expressed his support for the new coalition government, said spokeswoman Ayelet Frish.
"The president congratulated Prime Minister Netanyahu on the decision and said that a national unity government is good for the people of Israel and that the good of the state, in light of the crucial challenges facing it, requires broad national unity," the president's office said in a statement.
Israeli media reported that in exchange for joining the new government, Kadima leader Shaul Mofaz would be given a senior position.
His party would also be given a hand in re-drafting a controversial law that provides an exemption for compulsory military service to ultra-orthodox men in Israel.
Political disagreement over the sensitive issue was one of the major factors leading Netanyahu to push for early elections in September.
"We did a great thing for the sake of the State of Israel," Mofaz told Kadima members, according to Israeli Radio. "I don't want government portfolios, even for myself."
The surprise move by Netanyahu upends the political calculations of smaller left-of-center parties and provides him with a comfortable governing coalition less sensitive to the demands of his current right-wing coalition partners.
The deal may also change Israel's stance with Iran.
Mofaz, a former military chief-of-staff and defense minister, has generally been less hawkish on Iran than Netanyahu.
He has in the past expressed reservations about Israel going alone on a pre-emptive military strike on the Islamic republic's nuclear installations.
The new coalition Netanyahu leads will now consist of 94 Knesset seats from seven different factions. The Knesset is comprised of 120 seats.
The Knesset is likely to endorse the new coalition deal in the next two days.
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