Welcoming Lieberman's acquittal on graft charges, Prime Minister Benjamin Netanyahu felicitated his ally and sometime rival on the court's decision.

"I congratulate you on the unanimous acquittal and am happy about your return to the Israeli goernment so we can continue working together for the good of the people of Israel," Netanyahu said in a statement from his office.

He did not say what role Lieberman would take, but the Foreign Ministry portfolio had been kept open for him pending the verdict.

Lieberman (pictured 2nd left above) had been charged with alleged fraud and breach of trust, and was forced to step down as foreign minister before elections early this year to face the charges.

"This chapter is behind me. And I am focusing on the challenges ahead, and there are plenty of challenges," he said shortly after receiving the verdict.

Lieberman led his nationalist Yisrael Beitenu into a merger with Netanyahu's Likud Party before January elections. However, the coalition has proven to be bitterly divided, and he is now considering whether to break up the alliance, potentially robbing Netanyahu of his parliamentary majority.

US rescue bid

Lieberman's anticipated return to the Cabinet could have an impact on current US-brokered peace talks between the Israelis and Palestinians, as he is known for his hard-line views.

It comes as US Secretary of State John Kerry is in Israel in a bid to salvage the strained talks.

On Wednesday, Kerry met with Netanyahu in Jerusalem before heading to the West Bank city of Bethlehem, just south, for talks with Palestinian President Mahmoud Abbas.

Speaking at the meeting in Jerusalem, Netanyahu accused the Palestinians of creating "artificial crises" in the talks, and urged Washington to bring the negotiations back on track.

Kerry acknowledged the difficulties, but said he was "very confident of our ability to work through them."

On Tuesday night, Palestinians threatened to pull out of negotiations after an acrimonious dispute over Israeli settlement construction, according to a Palestinian official.

Kerry persuaded the two sides to reopen talks in late July after a nearly three-year break with the goal of reaching a peace deal within nine months.

tj/mkg (AP, dpa)