Israel Heads Into Unknown as Netanyahu’s Election Gamble Fails
An election campaign billboard featuring Benjamin Netanyahu and Yair Lapid, in Sderot, Israel, on March 23, 2021. (Photographer: Amnon Gutman/Bloomberg)

Israel Heads Into Unknown as Netanyahu’s Election Gamble Fails

(Bloomberg) -- Benjamin Netanyahu’s gamble to hold elections for a second time this year backfired, as a deadlocked result left Israel convulsed by a new wave of political turmoil.

The inconclusive race against his centrist rival, former military chief Benny Gantz, dealt a tough blow to Israel’s longest-serving prime minister. At best, he’ll return to office badly weakened at a time when Israel’s diplomatic and security challenges are mounting and the Trump administration prepares to present its Middle East peace plan. At worst, he’ll be forced from power and rendered more vulnerable to prosecution on the corruption charges that have dogged him in recent years.

With most votes counted by midday Wednesday, Netanyahu’s nationalist Likud slightly trailed Gantz’s centrist Blue and White. Neither party has the backing of 61 of parliament’s 120 lawmakers, leaving each to reach out to other potential governing partners.

Israel Heads Into Unknown as Netanyahu’s Election Gamble Fails

The political horsetrading will be feverish in coming days as Netanyahu and Gantz jockey to line up the most support. There’s also pressure for their parties to join forces in a national unity government, a move that might require Netanyahu to step aside or be forced out.

After a near-final tally is released Thursday, President Reuven Rivlin will consult with the various parties to see whom they recommend he ask to form the next government. Coalition talks could take as long as six weeks.

“Under the current situation, we expect coalition-building negotiations in Israel to prove difficult and protracted,” said Kubilay Ozturk, analyst at Deutsche Bank, in an emailed response to questions. “The only consolation is President Rivlin’s determination to avoid a third election, which would hopefully lead to formation of a government in the end. Rising tension and security risks in the region could also serve as an amplifier in the government-formation process.”

Coalition Fail

Netanyahu engineered the revote after failing to form a coalition following the April 9 election, rather than give Gantz a try to build a government. With his political survival at stake, he launched a rancorous campaign that painted liberals and Israeli Arabs as bogeymen, and appealed to his nationalist base by vowing to annex West Bank territory the Palestinians want for a state.

Israel Heads Into Unknown as Netanyahu’s Election Gamble Fails

But these tactics, which worked for him in the past, fell short this time. The leader of the Joint List of Arab parties, Ayman Odeh, said the venom galvanized Arab voters to go to the polls. Poised to become parliament’s third-largest faction, the Joint List said it will sit down with Gantz to see if they can cooperate. The Arab parties represent about 20% of Israel’s population but historically haven’t taken part in governing coalitions because they reject Israel’s identity as the Jewish state.

Former Defense Minister Avigdor Liberman, an on-again, off-again Netanyahu ally, is in a strong position to become kingmaker. Liberman’s objection to military draft exemptions for ultra-Orthodox Jewish men led to the collapse of coalition talks after the last election, and his tough stand resonated among voters on both left and right in a country where conscription is otherwise compulsory. He’s been the most vocal champion of a national unity government that freezes out the ultra-Orthodox.

Israel Heads Into Unknown as Netanyahu’s Election Gamble Fails

Investors weren’t unnerved by the stalemate. “I think markets are reacting positively to the eleciton outcome, as it significantly increases the likelihood of a unity government,” said Micha Goldberg, head of capital markets at the Excellence Nessuah investment house, in an emailed response to questions.

Such a coalition would improve the prospects of any peacemaking with the Palestinians because it would be more centrist, and efforts to narrow the fiscal deficit would improve since fewer parties would be demanding budgetary concessions, Goldberg said. A broader leadership would also boost the government’s stability and longevity, even if Netanyahu is indicted, he added.

A defiant Netanyahu told cheering supporters at Likud headquarters in Tel Aviv early Wednesday that he would enter into negotiations with prospective coalition partners to form “a strong Zionist government” and block the formation of a “dangerous, anti-Zionist government” that would rely on the support of the Joint List. The crowd chanted, “Bibi, king of Israel,” and “We don’t want unity.”

Political newcomer Gantz ran a clean-hands campaign that resonated with voters desperate for an alternative to Netanyahu. The prime minister has been in office since 2009, and served a first term in the 1990s before being unseated by another former military chief, Ehud Barak.

Gantz stopped short of declaring victory but told a cheering crowd that “polarization and divisions are behind us, and unity and reconciliation are ahead of us.” He vowed to work toward a unity government, but has repeatedly said he won’t team up with Netanyahu while he faces corruption allegations.

The prime minister says the accusations were cooked up by left-wing opponents in cahoots with a press biased against him. Before coalition talks collapsed in May, he was promoting new legislation that would grant him immunity from prosecution as long as he’s in office. If Netanyahu loses this election fight, that option will fade and he’ll become more legally vulnerable.

In early October he’s scheduled to plead his case before Attorney General Avihai Mandelblit, who will decide whether to press bribery and fraud charges. Netanyahu is accused of accepting about $200,000 in gifts from wealthy friends and trying to win sympathetic press coverage by shaping rules to benefit media moguls.

The political uncertainty dovetails with renewed confrontations with Iran and its proxies in Syria, Lebanon and the Hamas-run Gaza Strip, and the expected release of the Trump administration’s Middle East peace plan. Israel’s political paralysis has already held up the presentation of the plan, which is facing an uphill struggle five years after Israeli-Palestinian peace talks stalled.

U.S. President Donald Trump has been one of Netanyahu’s most fervent allies, showering him with political gifts such as moving the U.S. embassy to Jerusalem and withholding funds from the Palestinians. Ahead of April’s election he recognized Israeli sovereignty over a section of the war-won Golan Heights -- but that wasn’t enough to help Netanyahu over the top this time.

©2019 Bloomberg L.P.

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