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UPDATE 1-Israel's Netanyahu looks to vote in new government on Thursday

(Adds background, detail)

JERUSALEM, Dec 26 (Reuters) - Israeli Prime Minister-designate Benjamin Netanyahu called a vote in parliament on his new government for Thursday Dec. 29, the speaker of the Knesset said on Monday, after almost two months of coalition wrangling.

Netanyahu's bloc of right-wing and religious parties won a clear victory in parliamentary elections last month, but the veteran leader has had a harder time than expected in finalizing deals with his partners.

Despite campaigning together, Netanyahu has struggled to meet the demands of his allies, who have demanded a significant slice of power in exchange for their support.

Ahead of the vote in parliament and a formal swearing in of the new government, Netanyahu will have to officially present the members of his cabinet.

Israel's longest serving prime minister has vowed to govern for all Israelis but he will head one of the most right-wing governments in the country's history with key ministries in the hands of hardliners.

Itamar Ben-Gvir, head of the Jewish Power party will have authority for police as security minister while Bezalel Smotrich's Religious Zionism party will have broad authority to allow the expansion of Jewish settlements in the West Bank.

Both oppose Palestinian statehood and support extending Israeli sovereignty into the West Bank, adding another obstacle to a two-state solution, the resolution backed by Palestinian leaders, the United States and European governments.

The finance ministry is expected to be shared by Smotrich and Aryeh Deri, from the religious Shas party, with each man serving for two years. Deri's appointment will depend on parliamentary support for a legal amendment allowing him to serve despite a conviction for tax fraud.

Liberal Israelis have also been alarmed by statements from a number of other members of coalition parties against gay rights and in favour of allowing some businesses to refuse services to people based on religious grounds.

President Isaac Herzog, the head of state who stands outside day-to-day politics, said on Sunday that any threat to the rights of Israeli citizens based on their identity or values would be counter to Israel's democratic and ethical traditions. (Reporting by Ari Rabinovitch; editing by James Mackenzie and Alexandra Hudson)