Three Israelis were wounded when a Katyusha rocket landed near Nahariya, prompting immediate return artillery fire by the Israel Defence Forces.

Lebanese militant group Hezbollah denied firing the rockets, and the attacks were condemned by Lebanon's Prime Minister, Fouad Siniora, who criticised Israel's return fire as "an inexcusable violation of Lebanese sovereignty".

The attack was believed to have been carried out by a Palestinian militant group inside Lebanon, the same group thought responsible for similar attacks during Israel's war with Gaza last month.

It was the third rocket attack on northern Israel from southern Lebanon in the past month.

The attack came only 24 hours after Israeli President Shimon Peres said he would give Likud leader Mr Netanyahu 42 days to assemble a coalition government.

Accepting the task, Mr Netanyahu made yet another call for Tzipi Livni, leader of the centrist Kadima party, and Ehud Barak, leader of the Labor Party, to join him in a unity government.

"For decades we have not withstood so many challenges at the same time," he said. "To face these challenges we need to join hands and unite all the forces within the people."

Under Ms Livni's leadership, Kadima won 28 seats in the new Knesset - one more than Likud. Kadima won more seats than any other single party.

However, the right-wing block of parties, led by Likud, has won as many as 65 of the 120 Knesset seats, leading to Mr Peres's view that they are most likely to be able to form a stable coalition government.

Ms Livni is unlikely to accept Mr Netanyahu's invitation to join any government.

Only last week she described the government he was about to form as extremist. and said she did not intend to be "a figleaf for a government that has no path and is dysfunctional".

Likewise, Mr Barak has said he believes the correct approach for Labor is to go into opposition.

In the February 10 election, Labor recorded its worst result, winning only 14 seats.

This meant it had fallen to become the fourth biggest party, behind Kadima, Likud and the right-wing Yisrael Beiteinu under Avigdor Lieberman.

Mr Barak said: "We are left with only one option and that is to decide not to recommend anyone for the premiership."

However, the political problem for Mr Netanyahu is that without support from the block of Kadima and Labour - 42 seats - he is largely at the mercy of the smaller special-interest groups in the Knesset.

While Mr Lieberman has endorsed Mr Netanyahu, he has said he would do so on the basis that Mr Netanyahu formed "a broad coalition" government that included Kadima.

He did not specify what he would do with Yisrael Beiteinu's 15 seats if Mr Netanyahu was not able to convince Kadima to join.

Mr Netanyahu is set to return to the prime ministership at a time when Israel is facing problems on many fronts.

Inside Israel, there are calls for the country to seek to make a peace deal with Syria, thereby removing one strategic problem.

For the past year, Turkey has been brokering peace talks between Israel and Syria in Ankara, but Syria withdrew from those talks when Israel began the war in Gaza on December 27.

At the weekend, senior Democratic US senator John Kerry, head of the US Senate's foreign relations committee, visited Syria for talks with President Bashar Al-Assad in Damascus.

The visit was part of a recent pattern of increased contact between US and Syrian officials.

After his visit, Senator Kerry was reported to have said: "Unlike the Bush administration, which believed you could simply tell people what to do and walk away and wait for them to do it, we believe we have to engage in a discussion."