Realizing that he cannot break an alliance between Yesh Atid and Jewish Home, Prime Minister Benjamin Netanyahu is ready to build a coalition with these two parties and exclude the ultra-Orthodox Shas and United Torah Judaism, sources close to the coalition negotiations said on Wednesday night.

Netanyahu has been hampered in the coalition talks by the joint insistence of Jewish Home’s Naftali Bennett and Yesh Atid’s Yair Lapid that they will only enter the government if Netanyahu commits to legislation that will see almost all young ultra-Orthodox males required to perform military or national service — anathema to the prime minister’s familiar ultra-Orthodox coalition partners.

His negotiating teams have been meeting daily with Jewish Home leaders, and on Thursday were set to meet with Yesh Atid representatives, amid reports late Wednesday that Netanyahu has concluded that he cannot build a coalition without these two parties. As for the ultra-Orthodox, Netanyahu “will give up on them for now,” Channel 2 reported, but would invite them to join the government at a later stage — possibly after the legislation on a universal draft is approved.

So concerned are the ultra-Orthodox parties at the possibility of being excluded, a Channel 10 report claimed, that they have indicated a readiness to accept a proposal put together by Eugene Kandel, the head of Israel’s National Economic Council, according to which the IDF would draft upwards of 60% of ultra-Orthodox Israelis aged 18-24 within five years, and the government would provide monetary incentives to those who comply while penalizing the yeshivas of those who don’t. Previously, the ultra-Orthodox parties opposed these parameters, though they had indicated a readiness for some increase in the proportion of ultra-Orthodox young men — most of whom currently do not serve — being inducted into the IDF.

Netanyahu, whose Likud-Beytenu won 31 seats in the January 22 elections, was given 28 days by President Shimon Peres on February 2 to form a coalition, but has signed up only Tzipi Livni’s six-seat Hatnua party to date. On Saturday, if he needs it, he will be granted a 14-day extension by Peres, which will take him to March 16. If he can claim to muster a majority by then, he could legally put off the swearing-in of his government until March 24, Channel 2 noted on Wednesday, leaving him more than three weeks to get the coalition deals done. However, so late a deadline would conflict with President Barack Obama’s visit, set to start on March 20. US officials have said Obama’s visit would be timed for after a new Israeli government was in place.

The inclusion of Yesh Atid (19 seats) and Jewish Home (12 seats) would give Netanyahu a healthy majority in the 120-member Knesset, though even a Likud-Beytenu, Hatnua, Yesh Atid, Jewish Home coalition faces difficulties. Bennett’s hardline-Orthodox Jewish Home, backed by Yesh Atid, opposes Netanyahu’s deal with Livni, which gives her a prominent role in efforts to negotiate a peace accord with the Palestinians. Still, Jewish Home officials were reported Wednesday to have assured Netanyahu that their alliance with Yesh Atid “is over” the moment both parties sign coalition deals.

Netanyahu has been wary of conceding to the Jewish Home-Yesh Atid demands, in part because he recognizes that both Bennett and Lapid have ambitions to become prime minister.

Should Netanyahu fail to form a coalition in the time allotted — deemed unlikely, but not impossible – the president could ask another politician to form a government or Israel could head to new elections.