In a dramatic turn of events, the Likud and Kadima parties agreed on a unity government this morning, averting the prospect of early elections. Prime Minister Benjamin Netanyahu and Kadima Chairman Shaul Mofaz finalised the surprising unity agreement hours before the Knesset was expected to approve its own dissolution and set 4 September as the date for the next elections.

Netanyahu announced that Kadima’s Mofaz would be appointed deputy PM and minister without portfolio, while also being included in Israel’s security cabinet. Mofaz told Kadima members the party would likely get more portfolios later on, apparently in 2013. As part of the deal, Kadima will also chair the Knesset’s Economics Committee.  Mofaz also told Kadima members that the “unprecedented deal” would allow the government to produce equality in carrying the burden of military service. “We did a great thing for the sake of the State of Israel,” he said. “I don’t want government portfolios, even for myself.”

Both Netanyahu and Mofaz convened their respective factions, which approved the unity deal. The PM informed Likud Knesset members that as part of the new coalition agreement, a new bill that would regularise the issue of haredi (ultra-Orthodox) enlistment into the IDF would be tabled by the end of June. The Kadima-Likud deal also calls for changes in Israel’s electoral system and approval of the next state budget.

Senior Likud officials estimated that Netanyahu decided to lead the unity move after realising the extent of public support for changing the law on haredi enlistment into the IDF. Meanwhile, Mofaz endorsed the deal after seeing Kadima sinking in the polls and heading for a poor showing in the September elections, which following this morning’s drama, will most likely be held, as planned, in October 2013.

Israel Labour Party leader Shelly Yachimovich will now become opposition leader instead of Mofaz. She has criticised the move, calling it an “alliance of cowards, and the most ridiculous zig-zag in Israel’s political history.” Postponement of elections is also likely to affect Yair Lapid’s new party, ‘There is a Future’ – as it will have to wait 18 months until the next elections. Lapid responded to the move this morning, describing the formation of the unity government as “the old kind of politics” and “corrupt and ugly.”