Israel Voted

While the major stock indexes were shedding 5% of their value today following Treasury Secretary Geithner's bank bailout announcement this morning, and the U.S. Senate voted to approve the bloated Senate stimulus bill mostly on party lines, Israelis went to the voting booth in one of their most consequential elections ever. The results are stunning.

Stunner #1: Netanyahu's defeat. Bibi Netanyahu has failed to garner more "mandates" (Knesset seats) than Tzipi Livni, the Kadima Foreign Minister. For weeks his Likud party had been leading Tzipi Livni's Kadima party by 4 or 5 mandates, about a 10% lead. Likud's lead seemed to grow as Kadima faded during and after the Gaza war. By the time the last available polls were published on Friday, however, the lead was down to 4%. And now it seems that Livni's party has eked out a victory over Bibi's Likud.

Livni's win doesn't guarantee she will become the next Prime Minister. Netanyahu's failure to win outright is sure to weaken him if he does.

Stunner #2: The Left collapses. Labor, the great ruling party of David Ben-Gurion, Golda Meir, Yitzhak Rabin and Shimon Peres is now irrelevant. Labor fell to 4th place in mandates, behind the fledgling right-wing party Israel Beiteinu (Our Home). With 13 mandates out of a total of 120, Labor and its leader Ehud Barak are marginalized. Labor's demise as a national party is historic for Israel and nearly unprecedented in the annals of modern democracy.

Meretz, the far left party formed in 1992 as a coalition of smaller parties, lost ground with a total of only 4 seats. In short, the far Left is reeling, and Kadima remains as the only viable center-left party in Israel.

Stunner #3: The winner (probably) cannot win. The irony is that while center-left Kadima won the most mandates, the voters rejected that party's appeasement agenda. Livni will likely not become Prime Minister despite winning the most votes because she cannot form a government with leftist and Arab parties alone. Kadima plus these leftist parties claim only 56 of 120 seats, or 47%, compared to 53% for the nationalist/right-wing bloc (Likud, Israel Beiteinu, Shas, UTJ, etc). Worse for Livni, if you disregard the seats garnered by the Arab parties, the "Jewish" Left represents only 42% of the total.

Likewise, Livni cannot bring together rightist parties for a center-right "unity" coalition. Likud won't join, and neither will Avigdor Lieberman's anti-Arab party Israel Beiteinu . The president (Shimon Peres) decides who to ask to form a governing coalition on the basis of many factors, only one of which is who received the most ballots. Another factor is which leader has the best chance of forming a stable government.

Peres may feel he has no choice but to give Livni 3o days to try to form a governing coalition even though she has little chance of success. And this being Israel, where money is even more important than power, Livni just might pull it off. Shas, the Sephardic religious party which always has its hand out, can be bought. And who knows, maybe even Lieberman can be persuaded to join a Livni-led government, but given his party's anti-Arab tilt it is hard to see how he would be acceptable to Livni's would-be coalition partners.

If Livni fails then Netanyahu will get a go at it. Either way the unpopular and corrupt Ehud Olmert will continue to serve as interim premier until a coalition is formed. There seems to be no getting rid of this guy.

As political theatre this will all be fun to watch. But the fun will be tempered by the knowledge that at a time of economic distress and existential threats, political theatre is something israel can ill afford.