Israelis will elect a new parliament March 17. As
Goldman notes, this early election was triggered by tensions within
the government:
PM Benjamin Netanyahu has governed Israel for nine years
(1996-1999 and 2009-present), making him Israel’s
second-longest-serving prime minister (only behind David
Ben-Gurion; 13 years).In the latest 2013 election, PM
Netanyahu’s center-right Likud party joined forces with right-wing
Yisrael Beiteinu and became the largest party within the Knesset,
winning 31 of the 120 seats (20 were members of Likud and 11 of
Yisrael Beiteinu). While this represented a meaningful fall from
the combined 42 seats the two parties won at the 2009 election, it
still allowed PM Netanyahu to form a majority coalition together
with Yesh Atid, the Jewish Home and Hatnuah (68 seats in
total).
This broad collation, however, turned out to be fairly
unstable due to disagreements on various topics.For
example, the alliance between Likud and Yisrael Beiteinu was
dissolved on July 9, 2014, following disagreements over how Israel
should respond to the rocket fire from Gaza. And on December 2,
2014, PM Netanyahu fired the Finance Minister (Yair Lapid; leader
of Yesh Atid) and the Minister of Justice (Tzipi Livni; leader of
Hatnuah) following disagreements over the budget (e.g., the
zero-VAR proposal from Lapid) and a ‘Jewish state’ proposal. On the
same day (December 2, 2014), Likud announced it would support a
dissolution bill with a vote scheduled for December 8. This was
passed with a vote of 93-0 in the third reading.
Early elections for the twentieth Knesset will be held on
Tuesday, March 17.
As WaPo notes, the main contest pits the
right-wing Likud party of Prime Minister Benjamin Netanyahu against
a surprisingly strong challenge from the Zionist Union, a
center-left political alliance led by Isaac Herzog of the Labor
party. Polls place Herzog's bloc ahead of Likud, but that's no
guarantee of victory.
Since Israel's first election in 1949, no single party has
ever won an outright majority in the 120-seat Knesset, the
name for the Israeli parliament. That means smaller political
parties -- and there are 26 in total -- play a significant role in
shaping the ruling coalition that forms the Israeli government
after the ballots get counted.
There is a high degree of political fragmentation in
Israel.
This is illustrated by the fact that the two biggest parties
(Likud and the Zionist Union) could get far less than half the
votes in the election (47 seats according to the latest poll).
There is the nationalist right-wing party appealing to Russian
speakers (Yisrael Beiteinu), a united list representing the
one-fifth of Israeli citizens who are Arabs (Arab Joint List), and
a party supporting the squeezed middle class (Yesh Atid). There are
also four religious parties (The Jewish Home, Shas, UTJ and
Yachad), for Jews of European versus Middle Eastern descent and for
varying degrees of nationalism. Then there is Meretz – a secular
left-wing social-democratic political party – that emphasises a
two-state solution to the Israeli-Palestinian conflict. Finally,
there is Kulanu led by Moshe Kahlon that focuses on economic and
cost-of-living issues.
Mr. Kahlon is a former member of Likud and served as Minister of
Communications and Minister of Welfare & Social Services.
Notably, during his time as Minister of Communications, he was
widely credited with leading the "Cellular Revolution" in Israel,
that allowed new competitors to enter the cellular communications
market and which lowered prices significantly.
One implication of the political fragmentation is that there is
a
high degree of uncertainty regarding the next
coalition(even when the election outcome is known).
Unlike in some other parliamentary democracies, Israelis don't
vote for a specific geographic constituency:
Rather, they vote for a slate of candidates represented by
a party or coalition of parties.
And here is The FT's projected Knesset...
While there are 26 or so smaller parties, as The FT reports,
there appears to be three possible scenarios for Israel’s
next coalition...
1. The “anyone but Bibi” coalition
Mr Herzog has urged voters to give his party at least 30 seats —
the quarter of the Knesset he says he needs to govern effectively.
Little wonder: his party has fewer natural allies in the
legislature than Likud.
The Zionist Union’s easiest partner would be the small,
leftwing Meretz. Others include the parties of Mr Lapid and Mr
Kahlon; the two Orthodox Jewish parties might be persuaded to join
the centre-left.This combination would yield 64 seats,
based on the Yedioth poll. Mr Herzog could also turn to rightwing
foreign minister Avigdor Lieberman’s Yisrael Beiteinu, although it
would sit awkwardly with Meretz.
It is also unclear whether Meretz and Yisrael Beiteinu, hovering
near the 3.25 per cent minimum threshold, will make it into the
Knesset at all.
Another potential kingmaker for the centre-left is the Joint
List, the new unified Arab party projected to come third. Mr Herzog
could approach them seeking explicit support or at least tacit
backing to block a rightwing government. Ayman Odeh, the party’s
leader, says he will not join a coalition with any “Zionist” party
but has hinted there are conditions in which he would give a
centre-left government support.
2. Netanyahu returns
When observing how closely polls are tracking, Israelis see a
parallel with the 2009 vote. This worries leftwingers and gives
conservatives hope.
In that election, Tzipi Livni, then head of the centrist party
and Mr Herzog’s running mate in Zionist Union this year, won one
more Knesset seat than Likud. However, the then president Shimon
Peres concluded Mr Netanyahu was better placed to form a government
and handed the task to him. This was the first time in Israeli
history that a second-place party went on to lead government.
Mr Netanyahu’s Likud may be flagging in the polls and internally
demoralised, but it still has more natural allies than Mr Herzog
can command. They include Naftali Bennett’s Jewish Home, the
religious parties and Mr Lieberman, Likud’s former partner. Mr
Netanyahu has also offered
the popular Mr Kahlon the finance ministry, although he has
not committed to take it.
There is a lot of bad blood between Mr Netanyahu and Mr Lapid
from the last administration but a joining of the two in government
cannot be ruled out. A coalition of this type could get 73
seats.
3. A grand coalition
Israeli media carried unsourced reports at the weekend that Mr
Rivlin could seek to facilitate a unity government as the vote was
unlikely to hand clear victory to either side.
The reports should be taken sceptically, at least until the
election, with both Mr Netanyahu and Mr Herzog saying they do not
want a unity government.
Israeli Labour Party leader and co-leader of the Zionist Union
list for the upcoming general election, Isaac Herzog gives a speech
during a debate on economy on March 11, 2015 in the costal Israeli
city of Tel Aviv. Six days before Israel votes in a snap general
election, the centre-left Zionist Union opened a lead of several
points over the ruling rightwing Likud party, a poll showed.
However, it is also worth remembering that Mr Herzog has said he
does not want to be “blackmailed” by smaller parties. He is a
pragmatist who has served as minister under rightwing prime
ministers — including Mr Netanyahu — before.
The Israeli right and left pulled together in a unity government
in 1967 when the country faced a major security crisis around the
Six Day War. In 1984, leftist Mr Peres and rightist Yitzhak Shamir
joined forces in response to an economic crisis, rotating the
premiership after two years.
Mr Herzog, whom Mr Netanyahu belittles by using his nickname
“Buji”, has promised to rotate the premiership to his running mate
Ms Livni after two years. On the campaign trail, he has brushed off
speculation about a unity government, saying he wants a solid
centre-left bench.
Still, instead of “Tzipi and Buji”, Israel could well get “Buji
and Bibi”. “It always makes sense for big parties to go together,”
says Yehuda Benmeir, senior fellow with the Institute for National
Security Studies in Tel Aviv. “This limits the ability of small
parties to blackmail them and get advantage beyond their
numbers.”
* * *
In Goldman's view,
Moshe Kahlon may hold the decisive vote
(especially for the markets)
This discussion has highlighted that Moshe Kahlon – leader of
the newly founded Kulanu party – may become the decisive factor in
the next government. Based on the most recent poll, both a
left-wing and a right-wing government would likely need his support
to form a coalition.
Mr. Kahlon has stated previously that he wishes to become
the new Finance Minister, and given his unique position, it seems
plausible that both sides may offer him this position.
Mr. Kahlon has stated a desire to improve competitiveness in the
banking sector, and thereby reduce fees and other financial
service-related costs. This could be similar to what he did to the
telecom sector when he was Minister of Communications. If so, it
could mean a potential reduction in consumer price inflation in the
medium term. As this type of deflationary pressure derives from
structural factors that are unrelated to domestic demand, it is not
clear that the BoI will respond to this scenario.
Still, given the currently very low headline inflation and
depressed inflation expectations, it may be challenging to ignore
these pressures for the central bank as it potentially risks
de-anchoring inflation expectations.
* * *
Finally, if all that is too complicated, here is one "guide"
from The Times of Israel's Benji Lovitt ( @Benjilovitt )