Israel’s coalition government agreement

  • The new coalition’s broad span elevates the risks of subsequent instability.
  • Substantive foreign policy changes are unlikely
  • Changes in domestic policy are likely to be more substantive.

Analyst: Kevjn Lim

Yesh Atid leader Yair Lapid, the main rival to outgoing Prime Minister Benyamin Netanyahu of the Likud party, announced on 2 June that an agreement had been reached to form a “Government of Change” that would end Netanyahu’s 12-year period in office. Lapid’s coalition is highly fragile, with 61 seats in the 120-seat Knesset (Israeli parliament), and comprises eight parties: Yesh Atid (17 seats), Blue and White (8), Israel Beitenu (7), New Hope (6), Yamina (Rightwards; 6), Labour (7), Meretz (6), and, unprecedentedly, an independent Arab party, Ra’am (4). It will also be only the second Israeli government led by a centrist party (after Kadima in 2006).

Importantly, to secure the support of Rightwards leader Naftali Bennett, whose party’s representation in parliament has fallen from seven to six after one defection, Lapid has accepted a rotational arrangement in which Bennett will serve the first two years of the four-year term as prime minister while Lapid serves as foreign minister.

Other major ministerial portfolios currently agreed on, but possibly still to be finalised, include New Hope leader Gideon Saar as justice minister, Benny Gantz remaining in defence, Meretz Leader Nitzan Horowitz as health minister, labour chief Meirav Michaeli in Transportation, Bennett’s deputy Ayelet Shaked as interior minister, and Israel Beitenu leader Avigdor Lieberman for finance. Ra’am’s leader, Mansur Abbas, is earmarked to head the Knesset’s internal affairs committee, which includes sensitive internal security matters.

Under the agreement, after two years Lapid will become prime minister; Saar, foreign minister; Shaked, justice minister; and Bennett, interior minister/alternative prime minister.

Israel's Yamina party leader, Naftali Bennett (L), smiles as he speaks to Yesh Atid party leader Yair Lapid during a special session of the Knesset, to elect a new president, Jerusalem, 2 June 2021.

Source: Ronen Zvulun/Pool/AFP via Getty Images

  • The new coalition’s broad span elevates the risks of subsequent instability. Assuming it gains parliamentary approval and is sworn in (by 14 June), the coalition is likely to function in the near term but carries moderate to high risks of collapse during its four-year term. Unlike the largely ideologically aligned right-wing bloc headed by Netanyahu until April 2020, the main force currently uniting the new coalition is its desire to remove from office Netanyahu, who remains Israel’s single most popular politician and leader of the largest party. The coalition encompasses centrists (Yesh Atid; Blue and White), right-wing parties (Rightwards; New Hope; Israel Beitenu), centre-left or left-wing parties (Labour; Meretz), and a conservative Islamist Arab party (Ra’am). Policy disagreements are thus likely, and given the coalition’s minimal majority, the withdrawal of support by any one party, including Ra’am, or further desertions (for instance from Rightwards, the coalition’s weakest link) would risk an early government collapse. Another potential driver of instability would be Bennett changing his stance and withdrawing from the government, notably around the time he finishes his two-year period as prime minister, if grassroots support for his party has declined sharply and he seeks to protect his political prospects within a future right-wing coalition government.

  • Substantive foreign policy changes are unlikely. The main potential changes entail the likelihood of improved alignment by the new government with the US President Joe Biden administration, and its attempting to strengthen the Palestinian Authority. Iran and its Resistance Axis will almost certainly remain Israel’s primary external strategic focus for the four-year outlook, implying continuing Israeli efforts to degrade Iran’s influence and nuclear and military capabilities. To this end, rather than snubbing the United States, even if President Biden pushes to reinstate the nuclear deal with Iran, a Lapid-Bennett government is likely to co-ordinate policy more closely with the US. Additionally, coalition partners such as Meretz, Labour, and Ra’am, and perhaps also Yesh Atid and Blue and White, are likely to push for renewed talks to strengthen the Palestinian Authority/Fatah and President Mahmud Abbas and reduce the influence of Hamas. However, Rightwards, Israel Beitenu, and New Hope are unlikely to accept a reversal or even a freezing of settlement expansion, making any broader peace agreement unlikely. That said, prior plans for annexation are also very unlikely to proceed, with efforts to advance them a probable trigger of government collapse.

  • Changes in domestic policy are likely to be more substantive. A top priority is approval of the long-overdue state budget, which should now take place some time within the next three months or so. Although Bennett had previously pledged to cut taxes, the coalition government faces pressure to reverse course: Israel’s 12-month cumulative budget deficit remained high at 11.2% of GDP (NIS158.9 billion, or USD49 billion) as of April, versus 12.1% in March. Additionally, Israel Beitenu controls both the Finance Ministry and the Knesset's Finance Committee, giving Lieberman sweeping authority to reduce the previously generous funding to Ultraorthodox Jews through their own parties (United Torah Judaism and Shas), the main domestic rivals of Lieberman’s heavily secular, pro-settler right-wing party. Thus, fund reduction is likely even if Israel Beitenu and Yesh Atid do not insist on their longstanding policy positions of military draft for the Ultraorthodox. Furthermore, in exchange for Ra’am’s support, the coalition government will have to address high crime rates and relatively lower development within Israel’s Arab communities. Two of Abbas’s key demands during the coalition negotiations were the reversal or at least amendment of the 2017 “Kaminitz Law” against unauthorised building (seen to target mainly the Arabs) and formal recognition of several Negev Beduin settlements as towns.

Indicators of changing risk environment

Increasing risk

  • Even if Rightwards does not suffer additional defections, if polls show significantly declining popular support for the party over a perceived betrayal of its ideology, this would raise the odds of Bennett “jumping ship” and trying to salvage his position within the right-wing bloc.

  • Growing threats or physical attacks from right-wing extremists against coalition members, particularly right-wing figures like Bennett and Shaked, would increase pressure on them to abandon the coalition.

  • The coalition delays meeting Ra’am’s policy demands, raising the risks of Mansur Abbas withdrawing his support, including by voting against the upcoming state budget.

  • Fighting resumes between Israel and Hamas, making it difficult for Ra’am (and the southern branch of the Islamic Movement) and right-wing Jewish parties to be seen as co-operating within the coalition government.

Decreasing risk

  • Remedial and long-overdue policy such as combating intra-communal crime, confiscating unauthorised firearms, and increasing socioeconomic development is implemented in favour of Israel’s Arabs, lowering protest/strike risks within this community.

  • The state budget is passed, allowing the coalition to overcome one of its most pressing issues.

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