A candidate to become Israel's new foreign minister said Wednesday that Prime Minister-elect Benjamin Netanyahu should consider forming a coalition with the defeated Labor Party.

Such an alliance would help Israel in peace talks with the Arabs and foreign relations, said David Levy, a leading member of Netanyahu's Likud Party.Netanyahu, who narrowly defeated Prime Minister Shimon Peres on May 29, has until July 20 to form a coalition. Levy's comments fueled speculation that Netanyahu would welcome Peres' party into his government as a junior partner.

A Likud-Labor coalition could ease fears among Israel's Arab negotiating partners that Netanyahu, who ran on a hard-line platform, would renege on peace promises made by Peres.

Levy, who broke from Likud last year after a bitter fight with Ne-tan-yahu and returned in the spring, said Wednesday that having Labor as a coalition partner would ease relations with the Arab world and the West.

"There is no reason to rule it out, it should be examined," Levy told Israel radio.

The leaders of Jordan, Egypt and the Palestinians said after a meeting Wednesday that they expected Netanyahu to soften his stance on peace with the Arabs once he takes office.

"We are convinced, totally convinced, that the peace process is irreversible, that all that has been agreed upon will be implemented and that work toward a comprehensive settlement will continue," Egyptian President Hosni Mubarak said after meeting in Jordan with Palestinian leader Yasser Arafat and Jordan's King Hussein.

Peres' top policy adviser, Yossi Beilin, promoted the idea of a Likud-Labor coalition on Tuesday, saying it was the best way to reach a final peace agreement with the Palestinians.

Israel TV's Channel 2 said senior officials in Labor and Likud have discussed the idea of a governing partnership.

After meeting Tuesday with Peres, Netanyahu said the two leaders found they agreed on many issues. But the prime minister-elect has not invited Labor to join his government, despite a campaign pledge to do so.

A coalition with Labor would also give Netanyahu more leverage against the small religious and rightist factions with which he is now negotiating.