The Labor Party led by Israeli Defense Minister Amir Peretz, a key partner in Prime Minister Ehud Olmert's coalition, decided to stay in the government despite the addition of an extreme-right party into it, Israeli daily Ha'aretz said on Wednesday.

Following a meeting with Olmert Wednesday afternoon to finalize terms by which Labor would remain in the government, Peretz said he would recommend his party remain in the coalition.

During their meeting, the two agreed that the government would follow the guidelines of the coalition agreement and that they would not be harmed by the entry of Israel Beiteinu ("Our home is Israel") into the coalition.

It was also agreed that all jurisdiction of the defense minister would remain and that the Labor Party would still have senior partner status within the coalition.

The Labor Party was allocated an additional government position, that of assistant defense minister. It was further decided that Peretz would head a committee to address the issue of the non-Jewish sectors in Israel.

On Monday, Olmert and the chairman of the Israel Beiteinu party Avigdor Lieberman signed an agreement on the party's joining the coalition, which was seen as Olmert's efforts to bolster his shaky six-month-old government but caused disputes in the Jewish state.

Five out of Israel's Labor Party's 19 legislators signed a letter calling on the left-wing faction to oppose the addition of Lieberman's Israel Beitenu to the government.

"Sitting together with Lieberman (in coalition government) would legitimize a perception backing the expulsion of Arabs and would legitimize Lieberman as a leader," said the letter, which was sent to Labor's central committee members.

(Xinhua News Agency October 26, 2006)