* Netanyahu says will negotiate peace with the Palestinians * Palestinians say Netanyahu must commit to statehood * Netanyahu plans to present government next week (Updates after Jewish Home signs coalition deal with Likud, paragraph 6) By Jeffrey Heller JERUSALEM, March 25 (Reuters) - Israeli Prime Minister-designate Benjamin Netanyahu said on Wednesday his government would negotiate peace with the Palestinians, but made no mention of their U.S.-backed quest for statehood. In a speech a day after enlisting the centre-left Labour Party into a broad-based administration that could help him avoid friction with Washington over peacemaking, Netanyahu focused on his plans to shore up the Palestinian economy. "If we have a strong Palestinian economy, that's a strong foundation for peace," Netanyahu said in a speech to a business forum, pledging to remove some "bureaucratic handicaps" stunting growth. He told legislators from his right-wing Likud party, in separate remarks, that he planned to present his new government for parliamentary approval next week, a Netanyahu spokeswoman said. The vote, she said, would likely be held on Monday or Tuesday. Under a mandate from Israel's president, Netanyahu has until April 3 to form a government. On Wednesday evening Likud signed a coalition deal with the small, religious Jewish Home party, bringing the size of Netanyahu's coalition up to 69 out of the 120 members of parliament. That margin could decline, however, if any of 13 centre-left Labour party lawmakers who opposed the partnership with Likud withhold their support of the government. The partnership was signed on Tuesday. There appeared to be little chance the ruling centrist Kadima party would agree at the last minute to join up. Kadima won 28 seats to Likud's 27 in the Feb. 10 election that resulted in a strong rightist bloc in parliament. The Palestinian Authority and the United States have long urged Israel to ease restrictions on the movement of Palestinian people and goods in the occupied West Bank, where the Israeli military maintains a network of checkpoints. "I think that the Palestinians should understand that they have in our government a partner for peace, for security and for rapid economic development of the Palestinian economy," he said. "This means that I will negotiate with the Palestinian Authority for peace," Netanyahu added, describing an "economic track" as a complement to political talks in an apparent bid to ease any international concerns he might not seek a peace deal. Asked about Netanyahu's comments, Nabil Abu Rdainah, a spokesman for Palestinian President Mahmoud Abbas, said the incoming Israeli government "must be committed in an explicit manner, without ambiguity, to the two-state solution". TWO-STATE SOLUTION Netanyahu has shied away from declaring support for the establishment of a Palestinian state in the West Bank and Gaza Strip, alongside Israel, an objective U.S. President Barack Obama reaffirmed on Tuesday at a news conference in Washington. But under the coalition deal with Labour, led by Defence Minister Ehud Barak, Likud agreed to respect all of Israel's international agreements -- a formula that includes accords envisaging Palestinian statehood. Indirect acceptance of that goal and formation of a broad government that includes Labour, the moving force behind interim peace deals with the Palestinians in the 1990s, might keep Netanyahu off a possible collision course with Obama. Netanyahu is widely expected to finalise his government in the next few days and ask parliament to ratify it next week. On Monday, Netanyahu sealed an agreement with the Orthodox Jewish Shas party, a perennial member of coalitions of right and left down the years. He had already signed up the Yisrael Beitenu party led by ultranationalist Avigdor Lieberman. But while enlisting those partners, Netanyahu made clear he preferred a broad-based coalition. A sharp turn to the right within Israel's government could raise international concern already heightened by Netanyahu's promise to appoint Lieberman as foreign minister. (Editing by xx xx) (For factbox on breakdown of blocs in Israeli parliament, double-click on [nLP943735], for factbox on Israeli political parties, double-click on [nLP678012]; for blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)
An Israeli police officer rides a horse during confrontations with stone-throwers in the northern town of Umm el-Fahm March 24, 2009. Dozens of Jewish ultranationalists marched along the outskirts of Umm ...
