Israeli Foreign Minister Tzipi Livni is expected to formally recommend to President Shimon Peres later Sunday that he call new elections, as she has failed in her attempts to form a new government.

Livni apparently made the decision Saturday night, after two ultra-Orthodox parties ruled out sitting in a new coalition since she had not met their demands.

She said she was "at peace" with the decision, the YNet news site reported Sunday morning.

"I decided not to give in, and this is what the president will hear from me," she added, in response to demands that she raise child allowance benefits and give a commitment that she would not negotiate the future of Jerusalem.

The Jerusalem Post daily quoted her as telling advisors Saturday night that "I'm sick of this extortion."

Once informed officially by Livni that she cannot form a government, Peres can either decide to entrust the task to another legislator, or else call for new elections to be held within 90 days.

Livni, who replaced interim Premier Ehud Olmert as leader of the ruling Kadima party on September 17, was tasked by Peres on September 22 to form a new coalition.

Although she managed to sign a new agreement with the Labour Party, Kadima's current main coalition partner, negotiations with another crucial coalition faction, the ultra-Orthodox Shas, failed to make progress.

Livni adamantly refused Shas' demand to allocate an extra 1.5 billion Israeli shekels (some 400 million dollars) in the 2009 budget for child allowances.

She also nixed a demand by the party, whose electorate is made up of mainly of religious, hawkish lower-income voters, to commit that she would not discuss the future of Jerusalem in her talks with the Palestinians.

Shas announced Friday it would not be joining a Livni-led coalition, and on Saturday night a smaller ultra-Orthodox faction, whose support Livni needed to form a narrow coalition, also announced that it would not join her coalition.