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What happened: Likud and Blue and White are now close to finalising the formation of the new government. However, last minute brinkmanship appears to have delayed the signing of an agreement. Yesterday, Prime Minister Benjamin Netanyahu met with Blue and White leader Benny Gantz in an apparently successful bid to resolve the final three contentious issues: application of Israeli sovereignty in the West Bank, the division of power in the Judicial Selection Committee, and the identity of the next Knesset speaker.

• Regarding annexation, it was reportedly agreed Netanyahu can bring any such move to a vote in the Cabinet from July 10 onwards. Netanyahu committed to coordinate the move with US President Donald Trump and to consult with Gantz, though Gantz will not have veto power over the plan. Gantz also insisted that any moves in the Jordan Valley be made in coordination with the King Abdullah of Jordan.
• Netanyahu appeared to compromise on the Judicial Selection Committee and the appointment of a Blue and White candidate as Justice Minister (to chair the committee), although subsequent reports indicated he may have backtracked on the concession.
• Netanyahu acquiesced to Blue and White’s demand that Yuli Edelstein not return as Knesset speaker, although another Netanyahu loyalist, MK Yariv Levin, is expected to be elected instead.
• Blue and White released a statement late last night saying: “After reaching understandings on all issues, the Likud party asked to re-open discussions regarding the committee to appoint judges. In light of this, negotiations have been halted. We will not allow any change in the functioning of the judiciary nor damage to democracy.”
• Also yesterday, Labour leader Amir Peretz and his number two Itzik Shmuli announced that they will merge with Gantz’s Blue and White party. Both Peretz and Shmuli are expected to receive socio-economic portfolio’s in the new government. Labour’s third MK, Merav Michaeli, vehemently opposes entering the coalition and said she was “shocked,” adding: “To give portfolios to Amir Peretz and Itzik Shmuli, you don’t throw away the party of David Ben-Gurion, Yitzhak Rabin and Shimon Peres.”
• Meanwhile it remains unclear if the right wing Yamina party will join the upcoming coalition. Current Defence Minister Naftali Bennett is concerned his party will not be offered any of the senior ministries promised during the election campaign.
• While on a break during the negotiations, Netanyahu spoke to Russian President Vladimir Putin on the phone. According to Netanyahu, Putin endorsed the impending coalition deal saying (per Netanyahu): “It is very important that you unite forces for the State of Israel.”

Context: After two inconclusive elections last year, the coronavirus emergency created the necessary impetus for Benny Gantz to renege on his promise to sit with a prime minister under indictment. As a result, the Blue and White party split, with Yesh Atid-Telem (led by Yair Lapid and Moshe Yaalon) refusing to join a Netanyahu led government.

• The overall contours of the agreement between Likud and Gantz’s Blue and White include a prime ministerial rotation, with Netanyahu serving for 18 months before the post automatically passes to Gantz.
• The agreement includes an initial 30 ministers split equally between Blue and White and Netanyahu’s right wing ‘bloc’. Gantz is initially expected to become Defence Minister and Gabi Ashkenazi Foreign Minister. Blue and White will also hold key ‘democracy portfollios’ including Justice, Communications and Culture.
• Although under pressure due to his handling of the Coronavirus crisis, Yaakov Litzman (United Torah Judaism) is expected to remain Health Minister, while Shas leader Aryeh Deri will remain Interior Minister.
• The merger with Labour increases Blue and White’s parliamentary strength to 19 MKs: 15 from Gantz’s Resilience party, two from the ‘Derech Eretz’ party of MKs Zvi Hauser and Yoaz Hendel, and two from Labour.
• Even without Blue and White’s support there are likely enough votes in the Knesset to approve West Bank annexation, irrespective of the formation of the government. Yamina – who may not sit in government – as well as the secular-hawks in the opposition like Yisrael Beitenu and Yaalon’s Telem faction could support it.

Looking ahead: Although the sides appear to have reached agreement there may not be time to conclude the deal before the Passover holiday begins tomorrow night. As a result the government may not be sworn in until after the holiday. The cabinet vote on West Bank annexation appears set for July 10, with severe pressure from the right wing that it be implemented quickly ahead of the US general election in November.