Australia / Israel Review

Amotz Asa-El

It took six weeks to hatch, and it is probably not quite the baby Binyamin Netanyahu had in mind when he called January’s early election. Yet the coalition with which he is embarking on his third premiership – sworn in on March 18 – looks likely to prove the most reformist.

Throughout the election campaign the general assumption was that Netanyahu and the Likud-Beiteinu party would win by a landslide and then create a conservative coalition – with perhaps a small centrist party added as decoration.

Instead, Netanyahu and his party lost a quarter of their following, partly to the modern-Orthodox Bayit Yehudi (“Jewish Home”) party and partly to the centrist Yesh Atid (“There is a Future”), a new party that emerged with a stunning 16% of the electorate. For a full month, Netanyahu manoeuvred in an effort to defy political gravity and still assemble a coalition centered on his old alliance with the two ultra-Orthodox parties that won jointly 15% of the electorate. It proved an exercise in futility.

Commanding only 31 of the Knesset’s 120 seats, Netanyahu had to grudgingly resign himself to the fact that his main coalition partner will be Yesh Atid and its charismatic leader, newspaper columnist and TV anchorman Yair Lapid. Even more perplexingly, Netanyahu antagonised the election’s other success story, Bayit Yehudi leader Naftali Bennett.

Like Netanyahu, Bennett is a graduate of the IDF’s elite commando unit Sayeret Matkal, and like Netanyahu he speaks a flawless English, as his parents immigrated from the US. However, the two men had a falling out last decade, when Bennett served as Netanyahu’s chief of staff. Having now won 12 Knesset seats it was clear that Bennett would be pivotal in any conservative coalition, but Netanyahu initially avoided him – as if unable to digest his former aide’s political maturation and electoral success.

Netanyahu’s emotional distance from the election’s two success stories – both also considerably younger than him – the 49-year-old Lapid by 15 years and Bennett by 23 – has pushed them into each other’s arms. The result was a unique alliance cemented by personal chemistry and shared social and economic views.

While the two espouse Netanyahu’s conservative economics, they oppose his longstanding pampering of the ultra-Orthodox community with budget transfers and concessions that are believed to exceed a cumulative US$1 billion per annum, whether as direct funding for religious seminaries or assorted incentives like lower daycare tuition, healthcare fees and property taxes.

Now much of this is expected to end, as Lapid will be Netanyahu’s new finance minister, Bennett will be minister of economy and trade, while Lapid’s number two, Rabbi Shai Piron, will be the education minister, and Bennett’s number two, Nissan Slomiansky, will be chairman of the Knesset Finance Committee.

The Coalition’s fourth leg, Justice Minister Tzipi Livni and her Hatnua (“The Movement”) party, will constitute Netanyahu’s dovish flank. Assigned with resuming and heading talks with the Palestinian Authority, the former foreign minister will try to breathe new life into the dormant peace process.

Whether or not she is successful will be largely determined by her Palestinian interlocutors, and expectations among pundits in Israel are low that a breakthrough will come on this front in the near future.

However, should there be diplomatic movement, Lapid is expected to back a prospective deal, in line with the expectations of his predominantly middle class, educated electorate. However, in such a scenario Bennett and his faction would likely bolt the coalition, as they represent, among other constituencies, West Bank settlers. In fact, Bennett in the past headed the Settlers’ Council, as did his number three, Uri Ariel, who will now be the new housing minister.

On the other hand, if a prospective peace deal was on the table, Netanyahu could almost certainly turn for alternative support to the two left-leaning Zionist parties who will remain in opposition for now – Labor and Meretz.

Lapid, Bennett and Livni will join Netanyahu, Defence Minister Moshe “Bogie” Yaalon, Internal Security Minister Yitzhak Aharonovich and Homefront Defence Minister Gilad Erdan in an intimate inner cabinet where top-secret issues will be discussed, most notably the Iranian challenge. The forum may be joined in the future by Netanyahu’s number two, Avigdor Lieberman, who is currently facing a trial on charges of fraud and breach of trust.

If acquitted, Lieberman will return to the position of foreign minister. For now, Netanyahu will double as acting foreign minister. With Lieberman currently absent, the inner cabinet will be surprisingly dovish, as Yaalon, a former IDF chief of staff, is considered a moderate when it comes to a prospective Israeli strike in Iran, while a hawk on the Palestinian front.

Yet the new government’s main activity, at least initially, will be on the domestic front.

The most urgent business will be the budget, where the outgoing government has accrued a deficit of around 4.2% of GDP. Though a modest deficit compared with most other developed economies these days, most economists agree Israel needs to quickly staunch the flow of red ink.

Closing this gap will therefore be new Finance Minister Lapid’s first task. Experts predict this will involve a NIS10 billion cut (A$2.6 billion) for fiscal 2013 and a NIS20 billion (A$5.2 billion) one for the following year. While much of this cut will come at the expense of the IDF and several transportation projects, a sizeable share will come at the expense of time-honoured transfers to the ultra-Orthodox community.

Even before this, Netanyahu has agreed to Lapid’s demand that a new bill for the gradual conscription of ultra-Orthodox men be passed ahead of the budget vote. The bill’s details have yet to be made public, but it is clear it will gradually send thousands of ultra-Orthodox men into national service, whether in the military, police, fire brigades, hospitals or assorted community services.

Meanwhile, child allowances for parents are expected to be slashed by some 30% and assorted benefits and discounts that ultra-Orthodox men enjoyed will be conditioned on their “exhaustion of their employability” – meaning going to work.

Whereas politically this may well mark the end of Likud’s 35-year political alliance with the ultra-Orthodox segment of the electorate, socially it is likely to accelerate voting with the feet, whereby a growing number of ultra-Orthodox men who currently spend years studying in religious seminaries will join the workforce. Economically, too, this transition will likely prove important because the more ultra-Orthodox men will work, the more they will earn, and the more they earn the more they will spend, thus stimulating retail demand.

On the legislative level, this is expected to also generate later this year a law that will compel ultra-Orthodox schools to teach a core curriculum of secular studies including English and math. Ultra-Orthodox politicians have staunchly opposed such demands over the years, seeing in them the potential beginning of government interference in the internal affairs of their tightly-knit communities.

At the same time, Bennett and Lapid want to improve the middle class’ lot, by easing tariffs on food imports, and thus improving competition and reducing prices. In addition, they intend to launch construction programs for rental housing. Most significantly, the land reform package Netanyahu failed to pass four years ago due to the opposition of his previous coalition partners should succeed in winning the backing of his new cabinet. If indeed launched, it may result in freeing up considerable real estate, which in turn will push down housing prices.

Netanyahu’s partners also obtained his agreement to political reforms, including legislation that will raise the threshold for a party to enter parliament to 4% (from the current 2%), a requirement of 65 MKs’ support (out of 120 total) for a successful no confidence vote, and a limit in future governments to 18 ministers – with a ban on the appointment of deputy ministers.

In sum, the third Netanyahu Government is markedly different from his previous cabinets, the first of which – in 1996-1999 – consisted solely of conservative parties, and the second outgoing one included Labor but as something of a fifth wheel. This government has a large centrist party at its heart and a new type of modern-Orthodox ally – together they are jointly challenging an unexpectedly humbled Netanyahu to demonstrate as prime minister the same reformist zeal he demonstrated a decade ago when he was finance minister in the Sharon Government.

At the same time, comprising 68 lawmakers, the new coalition seems sufficiently broad to likely last the 19th Knesset’s entire term. It may therefore be that once his new coalition starts working, Netanyahu will actually learn to appreciate his new partners’ energy, and also to benefit from their popularity – and thus slowly re-consolidate and re-build his own.