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Israel Early Vote Canceled as Kadima Joins Coalition

Photographer: MenahemKahana/AFP/Getty Images

Kadima leader Shaul Mofaz will become deputy prime minister and minister without portfolio. Close

Kadima leader Shaul Mofaz will become deputy prime minister and minister without portfolio.

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Photographer: MenahemKahana/AFP/Getty Images

Kadima leader Shaul Mofaz will become deputy prime minister and minister without portfolio.

Israeli opposition party Kadima agreed to join Prime Minister Benjamin Netanyahu’s ruling coalition in a surprise agreement that nullified plans to hold early elections in September.

“The state of Israel needs stability,” Netanyahu said today at a Jerusalem press conference, after the deal was reached early this morning. Under the accord, Kadima leader Shaul Mofaz, a former defense minister and chief of staff, will become vice prime minister and a minister without portfolio, with the next election scheduled to take place as originally planned in October or November 2013.

The move increases the coalition’s seats in the 120-member Knesset to 94, giving Netanyahu’s government more leeway to tackle domestic and foreign policy challenges. Mofaz has said the government should focus less attention on Iran and more on negotiations with the Palestinians as well as socio-economic issues.

“This provides Netanyahu’s government with a big unity government that can tackle a range of topics, including ensuring equality of military service among Israeli citizens, dealing with economic disparity and confronting the issue of illegal West Bank settlement outposts,” said Gerald Steinberg, professor of political science at Bar-Ilan University outside Tel Aviv.

‘United Political Front’

The agreement came after the Knesset gave preliminary approval for early elections yesterday. While Netanyahu was favored to win, he would still have needed coalition partners, according to polls published in the last few days. Likud would have won 31 seats compared with the 27 it holds now, according to a survey published in the Maariv newspaper.

“This also gives the government a broader consensus if it decides to take any military actions, including if necessary against Iran,” Steinberg said.

Mofaz, 63, was born in Iran and immigrated with his family to Israel in 1957. In 1998 he become the military chief of staff and in 2002 was appointed defense minister in the Likud-led government of then-Prime Minister Ariel Sharon.

As defense minister, Mofaz oversaw the withdrawal of troops and Jewish settlements from the Gaza Strip in 2005, an operation that drew criticism from many in the Likud party. Mofaz quit Likud with Sharon later that year to establish Kadima.

Smaller Parties

If the government needs to make a decision over the next 18 months regarding the Iranian nuclear program, “whether to attack, or not to attack, it is desirable that there be a wide, united political front that will have the public behind it,” Likud Environmental Protection Minister Gilad Erdan told Israel Radio today.

The alliance with Mofaz may reduce the disproportionate influence of smaller religious parties, said David Makovsky, director of research at the Washington Institute for Near East Studies. At the same time, it will likely ensure that Israel’s leading proponent of an attack on Iran, Defense Minister Ehud Barak, will remain in office, he said.

“It’s a stunning move,” Makovsky said in a telephone interview. “It’s a new world.”

‘Good for Security’

Netanyahu acted as his government faced political decisions over the next few months that threaten his coalition’s stability. He suffered a setback this week when Israel’s High Court of Justice ordered the destruction of five apartment houses in the West Bank Jewish settlement of Beit-El, and criticized the government for trying to stop demolition orders.

In February the court also invalidated the so-called Tal Law, which has enabled more than 50,000 students a year in ultra-Orthodox seminaries to avoid being drafted for the military service that is obligatory for Israeli Jewish men and women. Shas and United Torah Judaism, two religious parties in the coalition, are demanding that the exemption be maintained.

Mofaz today said the new coalition will pass a law that will distribute the burden of army service more equally among the population and said he will suggest new ways on how to restart peace talks with Palestinians.

“I have some ideas about how we can move forward in order to achieve an understanding with the Palestinians, my idea based on borders and security arrangements first,” Mofaz said at a joint press conference today with Netanyahu in Jerusalem.

‘Spells Trouble’

Likud parliament member Danny Danon, who opposes concession to the Palestinians, criticized the agreement with Mofaz. The accord “spells trouble for the Jewish communities” of the West Bank and “moves us away from the traditional values of the Likud,” Danon said in an e-mailed statement.

Netanyahu said at the briefing that Palestinian Authority President Mahmoud Abbas should “take advantage of this opportunity” to restart direct talks. Formal talks have been suspended since September 2010, when Netanyahu declined to extend a 10-month freeze on construction in West Bank settlements demanded by Abbas.

Labor party head Shelly Yacimovich, whose faction holds eight seats in parliament and who will now lead the opposition, said at a press briefing the Netanyahu-Mofaz agreement was “an alliance of cowards” and the “most absurd, disgusting zigzag in Israeli political history.”

Mofaz is a pragmatist on the Palestinian issue and on Iran, according to Aaron David Miller, a senior fellow at the Wilson Center, a Washington policy group.

“From the U.S. vantage point it changes nothing, either on Iran or the negotiations with the Palestinians,” Miller said in an e-mailed comment. “No deal with the mullahs on the nuclear issue in 2012, but no war either.”

Corporate Monopolies

The coalition agreement will enable Netanyahu’s government to move forward with measures to break up corporate monopolies and increase business competition, analysts said.

“Unity restores stability,” Netanyahu said in an e-mailed statement today. “A broad national unity government is good for security, good for the economy and good for the people.”

Israel’s benchmark stock index, the TA-25 (TA-25), closed down 0.2 percent to 1,145.33. The shekel weakened 0.1 percent to 3.8020 a dollar at 4:30 p.m. in Tel Aviv.

“The knee-jerk reaction is that political stability is good for the markets,” said Terence Klingman, senior analyst at Tel Aviv-based Psagot Investment House Ltd. “But when you dig a bit deeper our ultimate sense is that it allows the current government to continue its crackdown on business. There is going to be more pressure on the holding companies, more regulation in the communications industry.”

To contact the reporters on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net; Calev Ben-David in Jerusalem at cbendavid@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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