Australia / Israel Review

By Amotz Asa-El

Binyamin Netanyahu has changed. Thirteen years ago, when he was elected Israel’s youngest-ever prime minister, Netanyahu hastily patched together a narrow, right-wing coalition, and thus deprived himself of potential allies on both right and left. Now again tapped as prime minister-designate at 60, a less rash and more flexible Netanyahu has taken more time and sought more partners while he laboured hard to assemble a coalition that would be broader and more centrist than the one whose support he had already secured.

The election has given the six right-wing parties 65 of the Knesset’s 120 seats, but Netanyahu preferred to base his coalition on the Knesset’s largest faction, the centrist Kadima, which won one seat more than the 27 Netanyahu’s Likud won. However, Kadima leader Tzipi Livni disappointed Netanyahu by demanding ideological and political concessions he could not deliver. To the Likud leader, Livni’s requests that he publicly back Palestinian statehood and relinquish a portion of the premiership comprised political surrender.

Though the two are still believed to be secretly dialoguing, Netanyahu could not afford to wait for Livni and therefore veered further left, to Labor. There, following a very improbable sequence of developments, Netanyahu found his coalition’s missing piece.

Netanyahu’s strategy, to centrify his coalition, benefited from Labor leader Ehud Barak’s eagerness to retain his post as defence minister. After several weeks during which Barak would not admit this publicly, he finally conceded that he and Netanyahu had been secretly negotiating and in fact reached agreement. Though a good portion of Labor’s Knesset faction remained opposed to the idea of joining the famously conservative Netanyahu’s government, the decision was passed through the party’s conference on March 24 by a vote of 680-507.

The deal with Netanyahu, and the enlistment of the party membership, were made possible by Ofer Eini, the chair of Israel’s large and politically powerful Histadrut labour union federation, who argued that the most effective way to combat the recession’s impact on thousands of blue-collar workers was by joining the government.

For Netanyahu, even a truncated Labor faction’s backing constitutes a major asset: Domestically, it makes it easier to harmonise with organised labour as he struggles in the face of the global meltdown. And diplomatically, with Ehud Barak as his defence minister, Netanyahu will not been seen abroad as the leader of an intransigent, hardline coalition.

Netanyahu’s courtship of the centre has obviously been stalling the distribution of portfolios among the next government’s prospective ministers.

One victim of Barak’s survival in the Defence Ministry is Likud’s candidate for that position, former Chief of Staff Lt.-Gen. Moshe “Bogie” Ya’alon.

The tall, bespectacled paratrooper of few words who spearheaded Israel’s successes earlier this decade in its war on suicide terror, joined politics only several weeks before the election, and brought Netanyahu centrist voters who identified with Ya’alon’s blend of resolve, secularism and pragmatism. Ironically, this same quest for a centrist image has made Netanyahu sideline Ya’alon, who now hopes to become minister of education.

Even more challenging for Netanyahu will be his promises to the secular-nationalist Yisrael Beiteinu’s Avigdor Lieberman. With 15 lawmakers who, unlike Barak’s faction, will follow their leader through thick and thin, Netanyahu signed an agreement with Lieberman that unofficially crowned his party as Likud’s senior partner in the emerging coalition.

The biggest of several prizes Lieberman won is the Foreign Ministry where, paradoxically, he will be tasked with undoing the image problem that his electoral success created for Israel in parts of the foreign press and international community. Lieberman has already launched that effort, even before his formal appointment, as he told foreign journalists that for “real peace” he is prepared to leave his home in the West Bank. More importantly, he has been seeking ways to soothe Egypt, having once said from the Knesset podium that President Hosni Mubarak, who has never paid an official visit to Israel during his 28-year rule, can “go to hell.”

On another controversial level, Netanyahu has agreed to heed Lieberman’s demand to institute an absentee ballot for Israeli citizens abroad, something not currently allowed In Israel. The implications of such a reform can be far reaching, as the numbers, locations and inclinations of hundreds of thousands of Israeli citizens who live abroad remain a mystery. Lieberman, for his part, believes an absentee ballot will win him thousands of votes among hawkish Jews who carry Israeli passports but reside in the former Eastern Bloc, and possibly also among the sizeable communities of Israeli expats in New York, Miami and Los Angeles.

Flanked by Lieberman on his right and Barak on his left, Netanyahu has not only established himself as an Archimedean balancer on foreign affairs, but also on the economy, the treatment of which is even more pressing.

With Lieberman espousing Netanyahu’s fiscal conservatism, and with Barak’s passions absorbed by other issues from Gaza to Iran, the prime minister-designate is likely to have considerable leeway in handling the economic challenges that lie ahead of him.

For Netanyahu, the economy constitutes a passion, a principle and an opportunity. The former treasurer’s market reforms impressed economists, corporate executives and the middle class, but were bitterly attacked by social organisations. Netanyahu is now intent on personally leading Israel’s effort to minimise the effects of the global crisis. For that reason he intends to keep the finance portfolio for himself, an unprecedented double-appointment in Israel, where some former prime ministers doubled as defence ministers and others as foreign ministers, but none as treasurers.

As treasurer, Netanyahu’s options will be varied, but the stakes will be high no matter which course he chooses. His election promise, and ideological conviction, to cut taxes, might demand compromising his other principle – fiscal discipline. With tax returns already plunging as the economy shrinks along with the rest of the global economy, Netanyahu’s original plan, to make Israel’s corporate taxes the world’s lowest at 18%, and to cut the maximum income tax bracket to 35%, may prove impossible to deliver without breaching the budget deficit.

Then again, Netanyahu may have tempered his trademark Thatcherism.

As he returns to the Treasury four years after leaving it, the prime minister-designate’s harmony with union leader Ofer Eini is believed to reflect his intention to appear more socially compassionate and economically eclectic this time around. In this spirit, Netanyahu has agreed to restore some of the social spending he slashed back in 2003. This means, for instance, raising monthly child allowances from their current equivalent of $US 40 per child, by roughly US$10, US$15 and US$20 for the second, third and fourth child respectively.

This is not quite a restoration of the pre-2003 order that Netanyahu swiftly undid, whereby parents had received some US$200 in cash monthly for every child from the fifth onwards. Still, the new formula would constitute a moderation of Netanyahu’s reforms, as will his delegation of the Housing Ministry to the ultra-Orthodox parties, who are expected to use it in order to hand out what many secularists will decry as uneconomically subsidised and unfairly distributed mortgages. Similarly, while Netanyahu intends to appoint a Likud representative as education minister, he has not ruled out the idea of creating a new agency for the ultra-Orthodox education system, which would mean added funding for sectarian causes in a way that Netanyahu the economic conservative once fought.

Netanyahu’s potential hammering at his own reforms is arguably inescapable in a world where even the US nationalises banks by the dozens and breaches budgets by trillions, but Netanyahu may be trapping himself between Labor allies who believe in socialism and his religious partners who espouse populism. Reconciling his views with theirs, and doing so in a way that keeps the markets happy, may prove as challenging as reconciling Lieberman and Mubarak. Added up, all these opposing vectors mean that Netanyahu’s original preference, to strike an alliance with Livni, even if impractical as a strategy, was certainly understandable as a goal.