BICOM

Key points

• A unity agreement between Prime Minister Benjamin Netanyahu of the Likud and Kadima chairman Shaul Mofaz will significantly expand and strengthen Israel’s ruling coalition and improve the stability of the government. The coalition could in theory run until scheduled elections in November 2013.
• The coalition agreement emphasises new legislation to replace the Tal law, which exempted ultra-Orthodox men from military service, the need to pass a budget balancing social and security requirements, reform to the country’s electoral system and advancing the peace process with the Palestinians.
• Mofaz openly advocates a two state solution based on 1967 borders and Kadima’s presence in the government could give Netanyahu more options in the diplomatic process. As a former Chief of Staff and Defence Minister, Mofaz will also enter the decision making process over how Israel handles the threat posed by Iran’s nuclear programme. He has previously emphasised the importance of international diplomacy in addressing the Iranian threat.

Why did this deal come about?

• Having announced on Sunday 7 May that he was calling early elections, Netanyahu’s subsequent announcement the next day that early the elections were cancelled, and that the centrist Kadima party was entering the government, came as a surprise. Several political and legislative factors contributed to the decision.
• Kadima entered the government because its strength was expected to decline sharply in the planned elections. Currently the largest party in the Knesset with 28 seats, it was expected to sink to around ten. Entry into the government allowed Mofaz to postpone an electoral disaster.
• Netanyahu welcomed Kadima into the government because it bring greater stability and enables him to balance the pressure from hawkish coalition members and the right-wing of his own party, in addressing forthcoming legislative and political challenges.
• In addition, party activists pulling the Likud party to the right, threatened to hinder Netanyahu’s election prospects. On the evening of 7 May, Netanyahu was upstaged at a meeting of the Likud Central Committee, which rejected his bid to become Chairman of the Likud convention, which among other things approves the party’s list of Knesset candidates.
• Then on Monday 8 May, Israel’s Supreme Court upheld an earlier order to demolish by 1 July, five unauthorised houses in the Givat Ha’Ulpana neighbourhood in the West Bank settlement of Beit El. Carrying out this move during an election campaign threatened to alienate Likud’s support base.

What’s in the deal?

• The deal between Likud and Kadima committed to passing, by 1 August, a “fair and equal” alternative to the Tal Law. This law governed military conscription of ultra-Orthodox men, allowing for large scale exemptions, until it was recently found to be discriminatory by Israel’s Supreme Court. A special committee will be headed by Kadima to draft the legislation, which according to the agreement will set gradually increasing targets for equal conscription among all sectors of Israeli society, including ultra-Orthodox Jews and Arabs.
• The coalition aims to change Israel’s electoral system by the end of the year, overcoming problems with the directly proportional party list system, which destabilises governments by making them dependent on the support of small parties.
• Mofaz will be vice-premier, minister-without-portfolio and a member of ministerial committees on diplomatic, security and socioeconomic issues. Other members of Kadima may also receive ministerial positions in the future.
• Kadima will keep the influential chairmanship of the Knesset Foreign Affairs and Defence Committee and receive the chairmanship of the Knesset Economic Affairs Committee.
• The coalition agreement also stressed the need to advance the peace process “in a responsible manner.”
• The parties also agreed to draft a budget with a more equal allocation of resources.

What are the political implications?

• Netanyahu now leads the biggest governing coalitions in Israel’s history, with the support of 94 of the Knesset’s 120 members. This significantly increases the government’s ability to implement major policy items domestically and diplomatically, primarily by reducing the influence of smaller coalition members. Avigdor Lieberman’s hawkish Yisrael Beiteinu party, until recently Likud’s senior coalition partner, and the ultra-Orthodox parties, will no longer be able to threaten the collapse of the government.
• However, coalition members differ significantly on key issues. Maintaining a unified coalition, while dealing with major legislative challenges, like the drafting of a new conscription law, will still be difficult.
• The announcement has damaged the personal credibility of Shaul Mofaz. His u-turn in joining Netanyahu’s government, which he had previously pledged never to do, has brought harsh criticism for what many Israelis see as political opportunism. Mofaz will hope to use his position in government to build up his personal standing.
• The deal has threatened to the splinter the Kadima party. Haim Ramon, one of Kadima’s founders and most influential figures, announced on Thursday 9 May his resignation from the party. Kadima MKs associated with former party chairwoman Tzipi Livni also publically criticised the deal.
• The coalition agreement could be the start of a wider realignment in the party system. It is speculated that it could ultimately result in a formal unification of Likud, Kadima and perhaps members of Defence Minister Ehud Barak’s Independence party, ahead of the next elections. Many of Kadima’s MKs split off from Likud with former prime minister Ariel Sharon when he formed the party in 2005. Such a move would enable Netanyahu to strengthen the centrist force in Likud and counterbalance the growing influence of the party’s right-wing. However, this in turn could lead to splits within the Likud.
• The opposition now numbers just 26 MKs, and its power is significantly limited due to its size. Labour chair Shelly Yachimovich was hoping to restore her party’s strength in the elections, with polls predicting Labour’s rise to nearly 20 seats. Yachimovich’s challenge will be to maintain political momentum from her new role as leader of the opposition.
• Individuals that were gearing up to use the coming elections to enter the Knesset, like former journalist Yair Lapid and former Shas leader Arieh Deri, will also have to reconsider their political strategies, with elections now delayed by up to a year or more.

What can we expect to be achieved by this government?

• Despite political criticism, the new coalition has increased potential to carry out significant policy reforms and to take the initiative on diplomacy and defence:

Domestic

• Deadlines set by Supreme Court rulings compel the government to act on several contentious domestic issues. The courts have demanded that the illegal houses in Givat Ha’Ulpana be demolished by 1 July. Following that, a new, fairer law on national conscription, likely to be deeply unpopular with ultra-Orthodox parties in the coalition, must be passed by 31 July. Both issues will test the strength of the coalition and may cause some junior partners to leave.
• The Likud-Kadima agreement stipulates that electoral reform legislation should be finalised by December 2012, and will be in place for the next elections. The deal does not specify the changes, but possible amendments include the introduction of regional elections alongside the existing proportional system, and a rise in the electoral threshold. Both measures would aim to increase the power of larger parties and the stability of future governments.
• The new coalition will also need to pass a budget with Israel’s economy slowing somewhat and unemployment rising. The Bank of Israel recently lowered its growth prediction for 2012 to 2.9%, from 3.1%. The 2013 budget will have to balance the economic demand for fiscal tightening with the public demand for fairer distribution of resources, and is likely to include unpopular measures. The size of the coalition will be crucial in getting it passed.

Diplomacy and defence

• Mofaz, a former Chief of Staff and Defence Minister, will now be included in cabinet debates over Israel’s policy regarding the Iranian nuclear threat. In the past, Mofaz has expressed reservations about unilateral Israeli action and supported close coordination with the international community. At the same time, if Israel takes the decision to act against Iran, a broad coalition that represents the centrist forces of Israeli politics will be essential for securing public support and national unity.
• Since 2009, Mofaz has been advocating a diplomatic plan calling for the immediate creation of a Palestinian state with interim borders, and simultaneous negotiations on a final status agreement based on 1967 lines, with border adjustments to incorporate the settlement blocks. Mofaz has also supported gestures toward the Palestinian leadership in an effort to renew stalled talks between the sides. Kadima’s support will be essential in overcoming opposition from the political right, if Netanyahu seeks new ways to break the deadlock.