Israeli's Kadima party leader, Vice Premier Shaul Mofaz, warned Prime Minister Benjamin Netanyahu that if attempt to reach an agreement over the new draft legislation is not ready by Sunday, his party will leave the coalition.

Mofaz convened his Kadima faction for an emergency meeting on Wednesday afternoon amid a breakdown in efforts to draft a universal service bill.

"Without a historic decision we will not remain in the government. This is a crisis, but this is also an opportunity - and we are on a tight schedule," Mofaz said during the meeting.

Mofaz and Netanyahu are due to hold talks on the matter later in the evening, in a bid to unlock the political stalemate and prevent Mofaz from leaving the coalition.

In an effort to prevent Kadima from exiting the coalition, Vice prime minister Moshe Ya'alon (Likud) and MK Yohanan Plessner ( Kadima) met on Wednesday to strike a deal that would lead to a new legislation in the coming days, but the talks broke down.

"This is a withdrawal from all that's been achieved so far - we 're at a dead end," sources close to the talks told the Walla news site.

"The Likud has backed off of all it's agreements, including on draft age and personal and institutional responsibility," the sources said, adding "this looks like the biggest crisis since they began to work this week."

However, according to Ya'alon, "We are trying to formulate a bill with an outline for gradual implementation that, even if it won't satisfy everyone, will not rip the nation apart and will lead to a substantial increase in those bearing the burden" of military service, the Ha'aretz daily said.

But Kadima is blaming Ya'alon over a clause calling for punitive actions, including levying fines and even jail terms for draft dodgers, according to Israel Radio.

After the Supreme Court brought down the decade old Tal Law that exempted ultra-Orthodox citizens from the military service, differences in how to punish draft-dodgers are polarizing Netanyahu's coalition and preventing a new legislation to substitute the Tal Law.

The government is hoping to replace it with a new bill before the Tal Law expires in August, which coincides with the Knesset parliament's summer recess.