At first glance, Sharon's concerns may seem far-fetched. To the dismay of Palestinians and peaceniks everywhere, his right-wing Likud party was handed a resounding victory by the Israeli electorate, doubling the number of seats it holds in the Knesset (parliament) to 38, twice as many as Labour, its traditional rival and the second largest party. But Likud cannot rest on its laurels just yet.

Under Israel's rigorous proportional representation system, no single party ever wins an outright majority in the 120-seat Knesset. To secure power therefore, Sharon must assemble a ruling alliance from among the 12 other religious, secular, far-right and left-wing parties represented in parliament.

Sharon knows only too well the difficulties involved in holding such a union together: disintegrating coalitions have brought down Israel's last three governments, including that led by Sharon last year. Now, even with his renewed mandate, Israel's 'Bulldozer' premier is finding the going tough.

Sharon's preferred option is a government of national unity, and for this he requires the compliance of the Labour party, which formed the junior partner in the cabinet Sharon led last year. This time however, Labour is not playing ball.

To the surprise of many outside the party, and more than a few insiders, Labour leader Amram Mitzna has resolutely stuck to his election pledge of not joining a government led by Sharon, unless the hawkish premier is prepared to adopt Labour's pro-peace platform.

'We will not join a coalition with Sharon while he continues with his current activities [in the occupied territories],' says Labour party member and former finance minister Avraham Shochat. 'He must evacuate the settlements in Gaza; pull out of illegal and remote ones in the West Bank; and complete the security fence.'

Sharon has not taken kindly to the offer. 'When Mitzna met him [on 3 February], Sharon would not give an inch in negotiations. He refused to evacuate even one small settlement,' says Shochat. 'If that is the case, then we are prepared to sit as the opposition.'

Against the odds, Mitzna has succeeded in rallying the majority of the Labour party behind his stance, but the possibility of an internal split remains.

That is certainly the thinking in the ranks of Palestinians. 'Sharon is trying to get potential senior Labour defectors into his government,' warns Afif Safieh, Palestinian general delegate to the UK. 'There are those that would like to go, guided by the concern that if they don't, they'll be consigned to the 'Who's He?' rather than the 'Who's Who' of history. The party's cohesion is going to be tested over the coming months.'

Other senior Palestinian officials are also keen to see Labour stay out of any coalition. 'A union between Likud and Labour would spell bad news for the peace camp,' says the Palestinian Authority's Labour Minister Ghassan Khatib. 'Sharon's victory signals more of the same for the Palestinians, he will continue to use force to secure his objectives in the occupied territories. Labour's involvement in a coalition will only prolong the life of a Likud government. The less support he gets, the sooner Sharon will fall.'

Without Labour, Sharon will be all the more desperate to harness the forces of the third largest party in the Knesset, the aggressively secular Shinui. But here too his coalition plans could be thwarted.

'Our goal is to be in power so that we can accomplish the things we have promised our voters,' says Shinui's deputy leader and coalition negotiator Avraham Poraz. 'However, we will not sit in a government which has representatives from orthodox religious parties in the cabinet. If Likud does not agree, then we will accompany Labour in opposition, though we would prefer to join both parties in a national unity alliance.'

With Labour and the religious parties out of the equation, Sharon might just be able to cajole some of the smaller parties into forming a coalition alongside Likud and Shinui, which share similarly hawkish views over Israel's security concerns. But the margin for dissent in such a cabinet may be too tight for Sharon, leaving him with little choice but to put together a narrow far-right coalition.

Constructing an alliance from the small nationalist and orthodox Jewish parties that are hungrily jostling for ministerial positions would not prove too arduous a task for Sharon. Maintaining it might. First there is the question of how such a coalition would appear to Sharon's domestic audience and international partners. Despite his hard-line measures towards Palestinians - extra judicial killings, closures, curfews, house demolitions and pre-dawn military raids to name but a few - Sharon has managed to model himself in Israeli and US eyes at least as a moderate. This image will be hard to preserve in a cabinet crammed with representatives from some of Israel's most extreme political groups.

A narrow right-wing alliance will also cost Sharon in terms of manoeuvrability on the Palestinian issue. Sharon's vision of a two-state solution falls far short of any compromise acceptable to Palestinians. However, it looks positively dovish compared to the so-called solutions extolled by many on the far right, who would rather desert the government than allow through any law establishing a Palestinian state.

While there is no indication that Sharon is prepared to countenance anything other than violence against the Palestinians, it may yet prove diplomatically expedient for him to seek a settlement in the future. Some have already suggested that in the wake of a US-led war against Iraq, Washington's doves may counsel Israeli concessions in a bid to smooth ruffled Arab feathers.

A conflict with Iraq may also provide the war-mongering Sharon with a convenient way out of the coalition impasse. For, in a climate of steadily growing fear in Israel, few political parties would have the chutzpah to stay out of an emergency war government.

'If we were asked to join such a cabinet for a short time we would certainly consider doing so,' says Shinui's Poraz. Labour's Mitzna has also said his party would provide a 'safety net' over national interests. 'In an emergency situation, we would be prepared to join a war cabinet established to follow and make decisions,' confirmed Shochat.

However, Palestinians are sceptical of the impact conflict with Iraq would have. 'Unfortunately it seems that the US has its focus firmly set on another area of the region at the moment,' says senior Palestinian spokesman and Local Government Minister Saeb Erekat. 'A war with Iraq would only add to the complexities of the situation here, providing Sharon with a cover under which he can move towards fulfilling his end-game of full Israeli occupation of the West Bank and Gaza Strip. We need the breeze of peace in this region, not the wind of war.'

For Palestinians, the only grain of hope that can be salvaged from the re-election of Sharon is that it brings into sharp relief the need for international involvement to break though the Middle East stalemate. 'It is evident that, whatever the format of the government, the status quo will remain the same so long as Sharon is in charge,' says Erekat. 'The only way any settlement can be reached is through the intervention of the Quartet [the UN, the EU, Russia and the US].'

'Despite the protestations of the Israeli left, there is very little that the Palestinians can do to influence Israeli politics,' adds Khatib. 'The re-election of Sharon plays directly into the hands of those on both sides who want the conflict to continue . There is little we can do other than to ensure we have a leadership that belongs to the peace camp in Palestine.'

It seems unlikely that Israel will be able to reciprocate for a while yet.