By Dan Williams
JERUSALEM (Reuters) - Israel's president told lawmakers on Thursday to name a candidate to form a new government after Prime Minister Benjamin Netanyahu and challenger Benny Gantz both failed, a development that probably sets the stage for a third election within a year.
Adding to the political chaos, Israel's attorney general said he would announce at 1730 GMT on Thursday his decision on whether to indict Netanyahu in three long-running corruption investigations.
Netanyahu has denied any wrongdoing, and he said he would make a statement at 1830 GMT from his official residence.
He is under no legal obligation to resign if charged, and the opening of a trial could be delayed for months by a new election and any moves by Israel's longest-serving leader to seek parliamentary immunity from prosecution.
"These are harsh dark days in the annals of the State of Israel," President Reuven Rivlin said as he announced that the centrist Gantz had failed to muster enough support for a stable coalition after an unsuccessful attempt by the conservative Netanyahu.
During a 21-period mandated by law, Knesset legislators can nominate anyone in the 120-seat assembly to form a government.
If that fails, an election is triggered within 90 days, which would send voters back to the polls for the third time in a year after inconclusive elections in April and September.
The prolonged stalemate comes at a tricky time for Israel on the domestic and international fronts.
Its conflict with arch-foe Iran has deepened - Israeli warplanes hit Iranian targets in Syria on Wednesday after rockets were fired toward Israel - while the Palestinian issue remains unresolved as violence has flared anew.
Netanyahu's caretaker cabinet has been unable to plug a gaping hole in government finances and the deficit has swelled over the past year. Relations between Israel's Jewish majority and its Arab minority, and those between secular Israelis and ultra-Orthodox Jews, are also at issue.
Gantz and Netanyahu had looked at a power-share within a national unity government after they came neck-and-neck in both elections. But disputes about details, such as the timeline for rotating the premiership between them, were not resolved.
A former armed forces chief, Gantz had made a looming indictment against Netanyahu - dubbed "crime minister" by protesters - a focal point of his election campaigns.
Netanyahu is suspected of wrongfully accepting $264,000 worth of gifts, which prosecutors said included cigars and champagne, from tycoons and of dispensing favours in alleged bids for improved coverage by an Israeli newspaper and a website.
But even amid the suspicions, Netanyahu was able to keep most of his right-wing allies loyal, effectively blocking Gantz's path to the premiership.
Turning to lawmakers on Thursday, Rivlin said: "In the coming 21 days, there will be no 'bloc' or 'party'. Each and every person will sit alone with their conscience and will have to answer one question: What is my duty toward the State of Israel?"
But a new and successful candidate emerging from Israel's fractious party system looked unlikely.
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Within Netanyahu's right-wing Likud Party there were stirrings of internal dissent, with two of its 32 lawmakers saying they would now favour a leadership contest.
Many citizens voiced resignation and rancour at a deadlock that has deepened worries over economic and national security matters.
"We've had enough of you! Let us know when you make a decision," read the top headline on the mass-circulation Israel Hayom, alongside pictures of Netanyahu and Gantz as well as Avigdor Lieberman, a far-right political kingmaker.
Commenting on Netanyahu's legal woes, Nahum Tevet, a 72-year-old Tel Aviv artist, said: "It's all about Bibi trying to escape jail and, you know, we are all in trouble because of his personal problem.
ADVERTISEMENT"He should just step out and leave us alone, to be a normal state again, to have a normal government, to take care of all the problems - the social problems, political problems, economic problems - and God help us," Tevet said.
(Writing by Dan Williams; Editing by Stephen Farrell and Angus MacSwan/Mark Heinrich)