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Israel's Prime Minister Ehud Olmert (R) and Foreign Minister Tzipi Livni attend the weekly cabinet meeting in Jerusalem October 12, 2008. REUTERS/Jim Hollander/Pool

JERUSALEM (Reuters) - Israel's Kadima and Labour parties are close to a deal on a coalition government led by Tzipi Livni, a move that sets her on course to form a new centrist administration, Army Radio said on Sunday.

Foreign Minister Livni still needs to persuade other parties to join her to build a workable parliamentary majority. She was named by President Shimon Peres to take over from Ehud Olmert, who quit as prime minister over a corruption inquiry.

Olmert continues to serve as caretaker prime minister for now but if Livni cannot form a government by the start of November, an early parliamentary election is likely.

"The formation of as broad a government as possible at this time is the best thing for Israel and I know that the public will not forgive those who ... send Israel to elections at this time," Livni told Kadima members on Sunday night.

In order to present her governing coalition to the 120-seat parliament and gain a vote of confidence, Livni would have to enlist the support of a total of 61 members of the Knesset.

Olmert's centrist government which served for over two years, had the support of 67 lawmakers when he resigned. Analysts predict Livni's government would have a similar political orientation and probably also similar support.

A Livni aide speaking on condition of anonymity said the deal with Labour could be signed by Monday.

Army radio said Kadima and Labour negotiators would try to tie up loose ends in late-night talks before the start of a Jewish holiday on Monday afternoon.

(Writing by Ori Lewis; Editing by Sami Aboudi)