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The Netanyahu-Bennett relationship will define the next Israeli government

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It’s virtually certain that Benjamin Netanyahu will remain Israeli prime minister after the January 22 elections.

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But what remains unknown is whether he’ll pivot to the center or to the right in order to build the coalition he’ll need to command an absolute majority of Israel’s parliament, the Knesset (הכנסת).

One of the most important factors — if not the key factor — that will determine the composition of Netanyahu’s coalition is the state of the personal relationship between just two men — Netanyahu and his former chief of staff, Naftali Bennett, who as the rising star and leader of the stridently conservative Bayit Yehudi (הבית היהודי, ‘The Jewish Home’), is expected to win between 12 and 16 seats after Tuesday’s elections, according to polls.

The rise of Bayit Yehudi, a religious Zionist party that’s even more pro-settlement than Netanyahu and which opposes the two-state solution and, has been the most dominant storyline of the 2013 elections, with Bennett heralded as a rising star of Israeli politics and, in particular, the rise of religious Zionism.

At the outset of the election campaign, Netanyahu merged his Likud party (הַלִּכּוּד‎, ‘The Consolidation’) with the secular nationalist Yisrael Beiteinu (ישראל ביתנו‎, ‘Israel is Our Home’), led by former foreign minister Avigdor Lieberman.  But Lieberman’s resignation, stemming from an indictment on breach of public trust charges, has led to a more subdued campaign, and Netanyahu has watched as polls show the combined ‘Likud-Beiteinu’ coalition fall from its current 42 seats in the Knesset, Israeli’s unicameral parliament, to somewhere between 32 and 34.

Enter Bayut Yehudi, to Likud’s right — polls show that Lieberman’s troubles and Likud Beiteinu’s losses have all been to the benefit of Bayit Yehudi.

Although Bayit Yehudi, with its three seats in the outgoing Knesset, is a member of Netanyahu’s current coalition, Bennett has a complicated relationship with Netanyahu, to say the least.  Both Netanyahu’s camp and Bennett’s camp agree that Bennett left as Netanyahu’s chief of staff on less than optimal terms.

Throughout the campaign, Netanyahu has reserved his harshest criticism for Bennett — in comparison, he’s been relatively tame in going after other party leaders, including Tzipi Livni and Yair Lapid, who he may turn to as potential coalition partners.

Haaretz details the Netanyahu-Bennett relationship in a story this weekend (read it all), noting not only the tension between Bennett and longtime Likud advisers, but also between Bennett and the prime minister’s wife, Sara.  The article highlights the disappointment that Netanyahu felt over Bennett’s performance as chief of staff:

Bennett left after a lengthy period of tension with the boss. At least four sources who worked with Netanyahu at the time noted that he was not satisfied with Bennett’s performance, and felt that he “was not delivering the goods.”

Netanyahu’s confidants maintain that it was Bennett who put out the story that he left because of his poor relations with Sara Netanyahu. According to these sources, “Sara didn’t like him, but she didn’t fire him. That was an excuse that was invented in retrospect.” They add that after leaving the bureau Bennett was behind various leaks against Netanyahu, but that nowadays he tells everyone that relations between them were excellent.

Has Netanyahu already decided there’s no room for Bennett in his government?  Has he decided that it’s safer politically to keep Bennett in check inside government rather than allow him to remain in opposition?  No one knows the answer to that, and we won’t until we see the ultimate composition of Netanyahu’s next coalition.

On the one hand, the MKs likely to be elected under the Likud-Beiteinu ticket are even more right-wing than its current caucus, so there’s a logical natural affinity for a coalition between them and Bayit Yehudi.  Bennett has openly stated that he hopes and intends that Bayit Yehudi will be part of any center-right coalition.  He’s shrewdly argued that a vote for Bayit Yehudi is really also a vote for a Likud-led center-right government: vote for us, and we’ll make sure we keep Netanyahu’s government firmly on the right path.

His pitch, according to polls, has attracted even secular voters, who are attracted to his firm stance against a two-state solution — Netanyahu in June 2009 came out tentatively in support of the two-state solution for the first time in his career.

But if Netanyahu returns to government with the support of an even more conservative coalition, it’s likely to make already-tense relationships with the international community, including U.S. president Barack Obama, even more difficult.  The last thing Netanyahu wants over the next four years is further estrangement from his global allies at a time when he’ll need as much U.S., European and international goodwill as he can get on any number of issues, from the rise of Islamist rule in Egypt to Palestinian negotiations to dealing with Iran’s nuclear weapons program.

Beyond those considerations, of course, are the very intimate personal dynamics between Netanyahu and Bennett, and those dynamics remain uncertain.

What’s certain is the tenacity of the Likud attacks on Bayit Yehudi — earlier this week, Likud attacked Bennett for misleading advertisements (shown below), and Israel’s Central Elections Committee agreed, ruling that Bayit Yehudi must remove them.  The ads show Bennett and Netanyahu together, shrewdly linking the notion that a vote for Bayit Yehudi is a vote for a broad Zionist right-wing coalition led by Netanyahu.

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Likud’s leadership was none too pleased, and the bad feeling Bennett has engendered may inhibit the role Bayit Yehudi could play in any future government.  Continue reading The Netanyahu-Bennett relationship will define the next Israeli government

Fiscal, budget issues loom large in Israeli election

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Shelly Yacimovich took over Israel’s Labor Party (מפלגת העבודה הישראלית) in 2011 with a clear message — she would focus on Israeli economic policy, wagering that Israeli voters would welcome a message that has more to do with jobs than jihad, that emphasize incomes over Iran. ISrel Flag Icon

After all, many elections have been won on the maxim of ‘it’s the economy, stupid,’ so it’s not necessarily a bad strategy.

Nonetheless, the conventional wisdom is that Yacimovich’s wager hasn’t worked out, with Labor forecast to win just 17 seats in the latest Haaretz poll in advance of Tuesday’s elections for control of the Knesset (הכנסת), Israel’s 120-seat unicameral parliament, despite the ridiculous fragmentation of the center-left among five parties.

But Labor remains by far in the strongest position among the five center-left parties competing in Tuesday’s election, and given that Labor currently holds just 13 seats in the Knesset, it’s actually somewhat of a triumph.

The prevailing narrative in the campaign so far has been the rise of the very conservative Bayit Yehudi (הבית היהודי, ‘The Jewish Home’) and its leader, Naftali Bennett, who unrepentantly supports new settlements and unrepentantly opposes a two-state solution, and who parted ways with Netanyahu in 2008 after previously serving as his chief of staff.

But there’s a strong case to be made that the elections will be a turning point for the Israeli left.

In the latest Haaretz poll, 47% of voters believe that Israel’s socioeconomic position is the most important issue — in contrast, just 18% cited the Palestinian negotiations, 12% cited exceptions for ultraorthodox haredim to serve in the Israeli Defense Force, and 10% cited the Iranian nuclear weapons program.  Meretz (מרצ, ‘Energy’), an even more socially progressive party on the Zionist left, would win six seats, doubling its current representation in the Knesset.

When she became leader in 2011, social justice protestors were agitating throughout Israel over rising costs, income inequality and the stability of public spending on health and education.

Labor’s platform calls for a new 5% estate tax on estates of more than around $4 million (15 million new shekels) and the reintroduction of import duties previously cancelled by the government of current prime minister Benjamin Netanyahu.  Those revenues would finance additional funding for health care, education and housing assistance, as well as raising the minimum wage.

Upon assuming the Labor leadership, Yacimovich (pictured above with Israeli president Shimon Peres) was also trying to distinguish herself from her predecessor, Ehud Barak, the former prime minister who left the party in 2011 to continue as Netanyahu’s defense minister.  Barak announced late in 2012 that he would not stand for reelection to the Knesset and, while there’s a chance Netanyahu may ask him to return to the defense ministry from outside the Knesset, it seems equally likely that Barak could become the next Israeli ambassador to the United States.

Traditionally a dovish party, Labor nonetheless joined Netanyahu’s government following the 2009 elections, and Barak, who had served under former prime minister Ehud Olmert as defense secretary since 2007, continued in that role for Netanyahu.  Unlike Barak, who had a storied career as a leading general in the IDF, Yacimovich was a television journalist before moving into politics.

But though polls show a fairly predictable result on January 22, the real question is whether Netanyahu will pivot to the center or to the right in order to build his governing coalition, and that decision will have perhaps even greater consequences for economic policy than even security policy.

The current snap elections are happening in January, and not later this year, because of the Knesset’s failure to agree to a budget, and so the most pressing issue before the next government — barring any regional security crisis or a surprise military action in Iran or the Gaza Strip– will be Israel’s fiscal situation.

Just last week, the Israeli government announced that its budget deficit would be 4% of GDP, nearly twice as high as expected than expected, so the next government will be under incredible pressure to cut spending or even raise taxes, although Netanyahu’s finance minister Yuval Steinitz has ruled out any new taxes, though education minister Gideon Sa’ar is tipped to replace Steinitz in any new government.

The fiscal discussion will come at a time when Israeli growth is stalling.  Although the Israeli economy’s GDP growth estimate for 2012 has edged up to 3.3% from 2.7%, it’s less than the country’s 4.5% growth in 2011 and a trend of the past decade of around 4% to 5% growth.

The Israeli economy is expected to grow this year by an estimated 2.5% or 3%, also well below trend, although newly discovered natural gas deposits could boost the economy by up to 1% of GDP.  Moreover, the factors that motivated the 2011 social protests in Israel haven’t disappeared in the meanwhile.

So Yacimovich is right.  It really is the economy. Stupid. Continue reading Fiscal, budget issues loom large in Israeli election