Israeli Prime Minister-designate Benjamin Netanyahu said on Wednesday his government would be a partner for peace with the Palestinians, but made no mention of their U.S.-backed quest for statehood.

In a speech a day after enlisting the center-left Labor Party into a broad-based administration that could help him avoid friction with Washington over peacemaking, Netanyahu focused on his plans to shore up the Palestinian economy.

If we have a strong Palestinian economy, that's a strong foundation for peace, said Netanyahu, leader of the right-wing Likud party.

I think that the Palestinians should understand that they have in our government a partner for peace, for security and for rapid economic development of the Palestinian economy.

In an apparent effort to ease any U.S. and Palestinian concerns his government might not pursue a peace settlement, Netanyahu added: The economic track is not a substitute for political negotiations, it's a complement to them.

Asked about Netanyahu's comments, Nabil Abu Rdainah, a spokesman for Palestinian President Mahmoud Abbas, said the incoming Israeli government must be committed in an explicit manner, without ambiguity, to the two-state solution.

Netanyahu has shied away from declaring support for the establishment of a Palestinian state in the West Bank and Gaza Strip, alongside Israel, an objective U.S. President Barack Obama reaffirmed on Tuesday at a news conference in Washington.

But under the coalition deal with Labor, led by Defense Minister Ehud Barak, Likud agreed to respect all of Israel's international agreements -- a formula that includes accords envisaging Palestinian statehood.

Indirect acceptance of that goal and formation of a broad government that includes Labor, the moving force behind interim peace deals with the Palestinians in the 1990s, might keep Netanyahu off a possible collision course with Obama.

PEACE GOAL

Peace: It's not the last goal. It's a common and enduring goal for all Israelis and all Israeli governments -- mine included, Netanyahu said. This means that I will negotiate with the Palestinian Authority for peace.

The Palestinian Authority, led by the Western-backed Abbas, holds sway only in the West Bank following Hamas Islamists' takeover of the Gaza Strip in 2007.

Netanyahu is widely expected to finalize the composition of his government in the next few days and ask parliament to ratify it next week.

On Monday, Netanyahu, sealed an agreement with the Orthodox Jewish Shas party, a perennial member of coalitions of right and left down the years. He had already signed up the Yisrael Beitenu party led by ultranationalist Avigdor Lieberman.

But while enlisting those partners, Netanyahu made clear he preferred a broad-based coalition.

A sharp turn to the right within Israel's government could raise international concern already heightened by Netanyahu's promise to appoint Lieberman foreign minister.

With center-left Labor in his corner, Netanyahu would have a ruling majority of 66 seats in the 120-member parliament.

That margin could change if any of Labor's 13 legislators opposed to the partnership with Likud withhold their support of the government or if Netanyahu enlists several smaller parties into the coalition.

There appeared to be little chance the ruling centrist Kadima party, which won 28 seats to Likud's 27 in the February 10 election that resulted in a strong rightist bloc in parliament, would agree at the last-minute to join up.

(Editing by Jon Boyle)

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