Netanyahu Takes Israel to Election Unknown on Coalition Fail

(Bloomberg) -- Benjamin Netanyahu’s victory celebrations turned out to be premature.

The Israeli prime minister sailed past a tangle of corruption scandals to win a fifth term in a closely-fought election on April 9, with his usual band of nationalist and religious allies all saying they wanted him to form the next government.

But the man famous for outmaneuvering rivals was tripped up by onetime partners who couldn’t reach a compromise on who should serve in the army, and was forced to acknowledge he couldn’t cobble together a coalition government.

Determined to keep rivals from taking his job, Netanyahu resolved to disband the parliament sworn in a month ago and call a new vote. That blocked President Reuven Rivlin from tapping another person -- and quite possibly another party -- to form a coalition. Israelis will now go back to the polls on Sept. 17 with the prime minister betting his political future on a more favorable outcome.

That gambit could backfire, even though public opinion polls this week suggested a similar breakdown of Knesset seats.

“Elections are like wars,” said Shmuel Sandler, a political science professor at Bar-Ilan University. “You know how you go in, but you never know how it ends.”

The benchmark TA-35 stock index was up 0.3% as of 10:15 a.m. Thursday, while the shekel was slightly down.

Legal Entanglements

Netanyahu, who sat ashen-faced as Knesset voted to disband and hesitated as he cast his vote in favor, said afterward he had done all he could to prevent elections.

“We will run a campaign and we will win, and the public will win,” he vowed.

The prime minister’s political defeat leaves him weakened as he tries to fend off what he says are baseless graft allegations concocted by left-wing opponents out to topple him from power. In February, Israel’s attorney general notified Netanyahu that he plans to charge him with bribery and fraud. The prime minister will plead his case in a hearing in October and try to avert indictment.

In the course of coalition negotiations, Netanyahu had been talking with prospective partners about legislation to shield him from prosecution as long as he’s in office. Now he won’t be able to push that legislation through until a new parliament is seated -- and by then an indictment may already be filed.

“Netanyahu invested no time in building a government, he spent all his time trying to get an immunity law,” said Mitchell Barak, head of Keevoon Research, Strategy & Communications. Netanyahu “is known as ‘The Magician,’ and a magician is all about sleight-of-hand and illusions, but this time his illusion didn’t work so well. He could go out with a really colossal failure.”

The presentation of the long-awaited U.S. peace plan also could face obstacles. Its initial component is a late-June conference in Bahrain that’s meant to galvanize support for investments in the Palestinian economy.

The Trump administration’s Middle East envoys, Jared Kushner and Jason Greenblatt, are scheduled to meet with Netanyahu on Thursday. An administration official, who asked not to be identified, said the Bahrain conference will go ahead as scheduled and the U.S. will release the peace plan when the time is right.

Unprecedented Failure

It was the first time in Israel’s history that a prime minister-designate wasn’t able to form a coalition. The nominal reason for the impasse was a longstanding squabble over drafting ultra-Orthodox Jewish men into the army.

Former Defense Minister Avigdor Liberman -- whose secular Yisrael Beitenu party holds five of parliament’s 120 seats -- insisted that devout men must serve as their secular counterparts do, and denied that he was motivated by a vendetta against Netanyahu, an on-again, off-again ally. A bloc of ultra-Orthodox parties, which controls eight parliamentary seats, refused to back down on its demand to exempt the community from Israel’s compulsory draft.

The issue will continue to bedevil Netanyahu even if he wins new elections, as opinions harden on both sides of the divide, pollster Barak said.

“This is the opening round of Israel’s civil war,” Barak said. “It’s not about right and left here anymore, it’s about religious versus secular, or Jew versus Israeli. How do you want the State of Israel to be?”

Burning Billions

Without Liberman’s support, Netanyahu couldn’t form a majority government. It was Liberman’s resignation as defense minister in November that set in motion the previous coalition’s collapse. At the time, he said he couldn’t remain in a government he considered too soft on Palestinian militants in the Gaza Strip.

Netanyahu placed the blame for his failure to build a coalition squarely on Liberman.

“We are going to burn billions and paralyze the country for almost a year because of the ambition of one man,” he fumed.

“There’s no reason to drag the nation into unnecessary elections,” Netanyahu had said earlier in the week. “If there’s a will and readiness, we can resolve everything in two minutes.”

Somewhere, that will was lacking.

--With assistance from Ivan Levingston, Margaret Talev, Michael S. Arnold and Gwen Ackerman.

To contact the reporter on this story: Amy Teibel in Jerusalem at ateibel@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Michael S. Arnold

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