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Israel's president floats unity government between Netanyahu and Gantz

JERUSALEM, Sept 22 (Reuters) - Israel's president on Sunday began consulting with party leaders to discuss who should lead the country after no clear victor emerged from last week's election, suggesting Prime Minister Benjamin Netanyahu's Likud join forces with its main rival.

Netanyahu's right-wing Likud failed, for the second time in five months, to secure a clear election victory. The centrist Blue and White party led by ex-armed forces chief Benny Gantz has a slight lead with nearly all votes counted.

Gantz has so far rebuffed Netanyahu's calls to join a unity government.

Near-final results show Blue and White will be the largest single party in the new parliament with 33 of the 120 seats, while Likud has won 31 seats, three less than it had before.

President Reuven Rivlin on Sunday began consultations with the parties about choosing a leader to put together a coalition.

In a meeting with Likud party leaders, Rivlin said it was up to the "two biggest parties, the first and second that are almost equal in size, to join forces ... so that you together manage and establish a system that brings a stable government."

"This is what the people want. None of us can ignore that," he said.

There were only narrow differences in the two main parties' campaigns on many important issues, and an end to the Netanyahu era would be unlikely to bring significant changes in policy on relations with the United States, the regional struggle against Iran, or the Palestinian conflict.

Netanyahu and Gantz will now seek potential coalition allies, prominent among whom is the far-right former defence minister Avigdor Lieberman. He secured eight seats for his Yisrael Beitenu party, making him a potential kingmaker.

Lieberman on Sunday reiterated his call for a unity government and said he would not recommend either candidate in his meeting with Rivlin.

An increased turnout by Israel's 21-percent Arab minority saw the Arab-dominated Joint List coalition win 13 seats, making it the third largest grouping.

Religious parties representing Israel's Ultra-Orthodox communities, known as Haredim, remain a significant force, with Shas winning nine seats and United Torah Judaism eight seats.

The right-wing Yamina won seven seats, the leftist Labor-Gesher six, and the Democratic Union five. Full official results are due to be published next Wednesday. (Reporting by Ari Rabinovitch; editing by James Drummond)