Tomorrow the contacts continue and Peres will hold talks with delegations from the National Union - NRP, and Meretz.
It is expected that foreign minister Tsipi Livni , the new Kadima party leader , will be given the task of forming a new coalition.
Livni says she will opt for new elections if it quickly becomes clear that she will not be able to form a stable government .
This is what was reported earlier by Reka when it was not clear when Olmert would have formally resign.
As expected, Prime Minister Ehud Olmert announced his resignation at Sunday morning's cabinet meeting making the following declaration:
"I have decided to end my functions as prime minister of the government of Israel. I hope that Tzipi Livni will succeed in formating a national government with the composition she wants. For my part, I will help her with all my strength."
It is still not clear when Ehud Olmert will submit his formal resignation to President Shimon Peres. It may be Sunday afternoon or at the end of the week when the president returns from the United Nations General Assembly meeting in New York. Kadima Knesset member Otniel Schneller urged Olmert to wait until later this week.
When Olmert hands in his resignation, Peres will grant Livni 42 days to form a new government.
For her part, Livni stressed the need to work quickly to form a stable government, preferably a national unity government (NUG). She said she intends to decde quickly stressing the need to end the uncertainty. If it transpires in the short term that it is impossible to form a stable government, Livni said, then we will go to electons. Unconfirmed reports say she is giving the coalition negotiations a week and a half.
Should Livni fail to form a government, new elections would be called for early 2009, a year and a half ahead of schedule.
Olmert is meanwhile likey to stay on as interim premier until a new government is sworn in. Even though she is now head of Kadima, Livni does not automatically become prime minister.
Reported by Reka Israel
