The agreement awards important cabinet posts to the two party leaders who emerged as rising stars in the Israeli election in January: Yair Lapid of the centrist Yesh Atid party, the second-largest in parliament, and Naftali Bennett of the right-wing Jewish Home faction.
Their alliance in coalition talks compelled Netanyahu to meet many of their demands and exclude ultra-Orthodox parties that have been part of successive Israeli governments for decades. Those parties have used their influence to secure funding for religious schools, seminaries and other institutions, allocations that may now be slashed.
The makeup of the coalition, headed by an electorally weakened Netanyahu, sent conflicting signals regarding prospects for movement in peace efforts with the Palestinians, an issue that is expected to be high on Obama’s agenda during his meetings here next week.
Coalition accords with Yesh Atid and the small Hatnua faction led by former foreign minister Tzipi Livni call for a resumption of peace talks, but key posts were awarded to Jewish Home, putting its officials in positions where they can promote expansion of Jewish settlements in the West Bank and East Jerusalem.
Lapid, a newcomer to politics who made domestic reforms the focus of his election campaign, will become finance minister, and his party will also control the Education Ministry, where it could curb funding of ultra-Orthodox schools.
Bennett, another political novice, will be minister of economy and trade. His party will also receive the Construction and Housing Ministry, which plays a key role in building settlements. In addition, Jewish Home will chair the important Finance Committee in parliament, which wields significant influence over budget appropriations.
One of the first orders of business of the new government is expected to be Lapid’s electorally popular demand, echoed by Bennett, to “share the burden,” a reference to the conscription of ultra-Orthodox men for military or civilian national service. Tens of thousands of ultra-Orthodox are now exempt from such service to pursue religious studies with government stipends.
Netanyahu had wanted to include the ultra-Orthodox parties, his traditional allies, in a broad coalition, but ran up against opposition from Lapid and Bennett. The narrower coalition, with 68 seats in the 120-member parliament, could crumble with the departure of one of Netanyahu’s major partners. Yesh Atid has 19 seats, and Jewish Home has 12.
Shas, the largest ultra-Orthodox party, representing Sephardic Jews, has served in governments leaning both right and left, and was last excluded in 2003, when Lapid’s father, Yosef, head of the staunchly secularist Shinui party, joined the government of then-Prime Minister Ariel Sharon.
“This coalition is a humiliating defeat for Netanyahu,” said Eytan Gilboa, a political scientist at Bar-Ilan University. “He wanted a very different coalition but couldn’t break up the Lapid-Bennett axis. He has a narrow-based government, and at any point Lapid, Bennett, or both, could bring it down.”
Still, Netanyahu preserved key ministries in the hands of his Likud party and the ultra-nationalist Yisrael Beiteinu faction, which ran with Likud on a joint ticket that won 31 parliamentary seats.
Moshe Yaalon of Likud, a hawkish former army chief of staff, is slated to serve as defense minister.
Netanyahu will retain the post of foreign minister pending the outcome of court proceedings against Avigdor Lieberman, the leader of Yisrael Beiteinu. Lieberman was foreign minister in Netanyahu’s outgoing administration but resigned to face charges of fraud and breach of trust. If he is cleared, he is slated to return to the post.
Livni, who campaigned for a resumption of negotiations with the Palestinians, signed a coalition pact with Netanyahu last month and will serve as justice minister and chief negotiator if peace talks resume.
The Labor Party, with 15 parliamentary seats, will lead the opposition, in partnership with Shas and other ultra-Orthodox and Arab