Netanyahu could face election rematch after ballot he said he won

(Correcting days of week in paragraphs 7,13,19,23)

* Israeli leader has until Wednesday to form government

* Former defence chief Lieberman's party a crucial hold-out

* Parliament takes initial moves towards new election

* Netanyahu declared victory after April 9 ballot

By Jeffrey Heller

JERUSALEM, May 28 (Reuters) - Prime Minister Benjamin Netanyahu was quick to declare himself winner of last month's Israeli election, but he now has until Wednesday to appease an erstwhile ally, form a government and avoid a possible rematch.

The man at the centre of the crisis in Netanyahu's coalition-building, former Defence Minister Avigdor Lieberman, is sticking to his guns in a stalemate over military draft exemptions for Jewish seminary students.

The brinkmanship six weeks after the April 9 election poses another challenge to the decade-long reign of the right-wing leader some Israelis have hailed as "King Bibi" and deepens political uncertainty in a country riven with division.

Barring a breakthrough, Israel could hold a new election, with parliament already making initial moves towards a fresh poll and legislators proposing September for the national vote.

Without the support of Lieberman's far-right Yisrael Beitenu party, which has five seats in the 120-member Knesset, Netanyahu cannot put together a majority government led by his Likud party. Under a deadline mandated by law, he has until 2100 GMT on Wednesday to announce a new administration.

Political commentators were hedging their bets.

"Netanyahu is a wounded animal. The man is fighting for his life, and we shouldn't make light of his abilities," columnist Yossi Verter wrote in the left-wing Haaretz daily on Tuesday.

Rivals had already smelled blood in the water when Israel's attorney general said in February he intends to charge Netanyahu in three graft cases. Netanyahu has denied any wrongdoing, saying he is the victim of a political witch-hunt.

But in the closely contested April election, Netanyahu - dubbed "crime minister" by his opponents - appeared on course for a fifth term as head of a right-wing bloc.

All it would take, according to conventional wisdom, was the usual wheeling and dealing on cabinet posts and allied factions' pet projects.

Few imagined Netanyahu would not put a coalition together, even after he asked for and received a two-week extension to an original 28-day deadline.

WILD CARD

Suddenly, Lieberman became a wild card and the clock was ticking, with Netanyahu facing a scenario in which President Reuven Rivlin could pick another legislator to try to form a government if he failed.