The negotiation teams of the ruling Likud party and Naftali Bennett's Habayit Hayehudi faction met Friday morning to discuss a proposal for a way to share the burden of army service by all, drafted on behalf of Likud by Professor Eugene Kandel, who heads the National Economics Council.
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A joint statement released after the meeting the sides have not reached an agreement and the gaps were still wide.
By the end of the meeting, it was clear that if the Kandle outline remained as it is, Habayit Hayehudi would not be joining Netanyahu's coalition.
"The Kandle outline," a source with the party said, "does not lead to haredi draft nor to integrating haredim into the job market."
Habayit Hayhudi representatives in the coalition negotiations also brought up the issue of core studies, noting that English and math should be part of the curriculum of the ultra-orthodox school system.
Friday's talks also focused on the coalition agreement between Likud-Beiteinu and Tzipi Livni's Hatnua party. The Habayit Hayehudi negotiators said they would not be willing to accept the deal in its current form, as it determines that Livni will lead any future peace talks with the Palestinians.
Another meeting between the Likud and Habayit Hayehudi representatives is expected to take place next week.