JERUSALEM -- Israeli President Shimon Peres on Saturday granted Prime Minister Benjamin Netanyahu another two weeks to form a governing coalition, after Netanyahu failed to build a broad coalition including ultra-Orthodox Jewish parties.

In a televised address, Netanyahu told Peres that he has yet to build a coalition because some parties wish to "boycott" an entire Israeli demographic. It was a reference to the nationalist Jewish Home and centrist Yesh Atid parties, which have refused to join his coalition if it includes the ultra-Orthodox.

If Netanyahu fails to reach a government in two weeks, political newcomer Yair Lapid who heads Yesh Atid, Israel's second largest party, could be offered the chance to form the coalition, or new elections could be held.

Jewish Home and Yesh Atid are keen to end a controversial system of military draft exemptions given to ultra-Orthodox seminary students, who are allowed to study Jewish texts in lieu of military service. The two parties have been unwilling to sit in a government with ultra-Orthodox factions that don't want to see an end to the exemptions that date to the founding of the country.

But Netanyahu is keen on including ultra-Orthodox parties in his coalition because they have been loyal political partners in the past and their numbers add stability to his governing coalition.

Netanyahu said he believes the parties will come to an understanding about the draft exemptions, and that ultra-Orthodox Jewish Israelis will eventually accept them. He took a jab at the pro-settler Jewish Home party, saying that those who refused to align with specific sectors of Israeli society are acting like those around the world who wage boycotts against settlement activities.

"Who should understand this more than anyone is the settler population in Judea and Samaria, which experience boycotts on a daily basis," said Netanyahu.

He urged parties to join him to build a wide coalition that would unite the nation, saying that throughout history Jews have "undergone many tragedies because of baseless hate and brotherly strife."

Netanyahu has been struggling to form a coalition since January elections. His Likud-Yisrael Beitenu bloc won 31 seats in the 120-seat parliament, far short of the 61-seat majority he needs.

Last week, Netanyahu added his first coalition partner, former Foreign Minister Tzipi Livni, to serve as justice minister in his government as well as chief negotiator handling peace efforts with the Palestinians. But that appointment upset the Jewish Home party, which opposes negotiations with the Palestinians and has indicated that it does not want the dovish Livni to handle the peace process if it joins Netanyahu's coalition.

It will be virtually impossible for Netanyahu to form a government without support of the Yesh Atid and Jewish Home parties. For now, those parties are maintaining a common front, signalling that Netanyahu has to make a choice between them and the ultra-Orthodox.

Israeli analysts believe Netanyahu will, in fact, succeed in building a coalition, likely without the ultra-Orthodox.