JERUSALEM (Reuters) - Israel's right-wing Prime Minister-designate Benjamin Netanyahu was given two more weeks on Friday to form a government, allowing further time to try to balance his coalition by including the center-left Labor party.

Israel's February 10 election gave rise to a rightist majority bloc in parliament, prompting President Shimon Peres to task Netanyahu's Likud with forming a government within 28 days.

Friday's extension sets April 3 as his new deadline. If unmet, Peres could choose to designate someone else.

Though Netanyahu can clinch alliances with right-wing factions giving him control over most Knesset seats, he wants a broader, more stable coalition with consensus over how -- or if -- to pursue U.S.-sponsored peace talks with the Palestinians.

The 59-year-old ex-premier is also mindful of the global economic crisis and Israel's preoccupation with Iran's nuclear program, which it views as a clear threat.

I could have presented you, and the people of Israel, with a government on Sunday, a good government. But I chose to ask for the extension in order to make every effort to bring about a unity government, as I promised, Netanyahu told Peres as they met before reporters at the ceremonial president's residence.

Such dispensations are commonplace in Israeli governance, where the multitude of political parties makes coalitions inevitable. Peres, granting the request, said he very much appreciated Netanyahu's plans.

Labor's leader Ehud Barak, the outgoing Defense Minister and former military chief, has said he would ask his party's executive for a mandate to join Netanyahu's government. Labor was expected to vote on the motion next week.

LABOUR'S LOVE LOST

Signing on with Likud could rescue Labor -- and Barak, who is also a former prime minister -- from political entropy.

Once Israel's dominant party, Labor placed fourth in the February election, winning just 13 seats. Likud won 27 and centrist Kadima of outgoing Foreign Minister Tzipi Livni polled 28 seats, while far-right Yisrael Beiteinu won 15.

Livni has so far ruled out a Kadima alliance with Likud, telling her party she would not provide a fig-leaf for an ultranationalist cabinet that was not serious about peace talks.

Netanyahu wants diplomacy to focus on the Palestinians' economy and security forces, rather than their demand for sovereignty. The Palestinians have rejected this approach.

Barak told Israel Radio on Thursday that Netanyahu's overtures deserve to be considered. He suggested Labor could soften Netanyahu's hard-line team and avoid conflict with the United States over the Palestinian track and how to handle Iran.

U.S. President Barack Obama has begun engaging the Islamic regime in Tehran diplomatically to resolve the impasse over its nuclear plans, which Israel says are military. Iran denies that.

Labor and Kadima back negotiations for a Palestinian state in the West Bank and Gaza Strip, which Israel captured in a 1967 war. Israel quit Gaza in 2005, after which it was taken over by Hamas Islamists opposed to peace talks and locked in a power struggle with U.S.-backed Palestinian President Mahmoud Abbas.

Israeli media said Netanyahu offered Labor five ministerial jobs, including having Barak stay on as Defense minister.

But Labor faces a dilemma in that Netanyahu has pledged the job of foreign minister to Yisrael Beiteinu leader Avigdor Lieberman, whose hawkish talk about the Jewish state's Arab citizens, and neighbors, has stirred controversy abroad.

Half of Labor's lawmakers vowed after talks on Thursday to fight any bid to join ranks with Netanyahu, which the party's faction leader, Eitan Cabel, insisted in broadcast remarks would spell death for Labor's future.

(Additional reporting by Allyn Fisher-Ilan; Editing by Douglas Hamilton and Samia Nakhoul)

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