Few foresaw the surprising setback suffered by Prime Minister Benjamin Netanyahu, his Likud party and the right in general in Israel’s recent general election. It is an outcome that will have important ramifications for Israel’s domestic politics and foreign policy alike, particularly its Middle Eastern diplomacy.

Although the final vote tally awaits (soldiers’ votes have not yet been fully counted), the basic result is known. Given the current stalemate between the right and left, a shift of one or two seats (out of 120) in the Knesset could make a difference in the composition of the next government, which in Israel is always a coalition of some type.

Netanyahu was the sole contender for the position of prime minister, and his re-election, together with the rightwing parties’ overall victory, seemed a foregone conclusion. He and his allies were challenged by four parties or electoral lists — Labor, Yesh Atid, Hatnuah, and Meretz — though their leaders (three of them women) were not perceived to be running for prime minister.

Three of these groups — Labor, Yesh Atid, and Hatnuah — were viewed as potential coalition partners in a Netanyahu government; the small, leftwing Meretz was expected to remain in opposition.

At this point, it seems certain that Netanyahu will form a new government, but he will be a much weaker prime minister than he was during the past four years. The main winner was Yair Lapid, whose Yesh Atid (“There is a Future”) emerged suddenly to pick up 19 seats and become the second largest party in the Knesset. Moreover, like the opposition, the rightwing bloc that comprised Netanyahu’s last government has undergone some important shifts.

Several developments converged to produce this unexpected outcome. For starters, the Israeli middle class and younger voters took the social protests of the summer of 2011 into the ballot box. If Netanyahu thought that he had managed to take the steam out of the protests over high housing prices and falling living standards, he was proved wrong.

The middle class and the young did two things: they turned out in higher-than-expected numbers, and they voted for new faces. In addition to unhappiness with the housing shortage and the state of the economy (particularly the large budget deficit), their vote reflected the sense that radicals in Netanyahu’s coalition were carrying the country to the extreme right. Theirs was a vote against the lack of progress and hope in Israel’s relations with its Arab neighbors, the open rift with U.S. President Barack Obama, and the cost of social welfare for the ultra-Orthodox, who rarely hold productive employment.

Initially, it seemed that the Labor Party’s new leader, Shelly Yachimovich, would be the main beneficiary of this public anger; but, a series of mistakes reduced her support, leaving Labor with 15 seats — and benefiting Yesh Atid.

Indeed, Lapid, a popular, eloquent, and attractive television journalist, clearly found the right formula for opposing the status quo without alienating too many voters with radical positions.

Naftali Bennett, a comparable figure on the right, succeeded in taking away votes from Likud and other parties, rejuvenating a tired Zionist Orthodox party and ending up with 12 seats. Bennett is religious and the former head of the West Bank settlers’ council, but he is also young, articulate, a successful high-tech entrepreneur, and a former combat officer — a combination that attracted both radical rightwing voters and young, urban, secular support.

The election’s outcome initially gave rise to a number of scenarios, including the prospect of Lapid forming an alternative center-left coalition. But Lapid himself ended the speculation by indicating that his own choice was to join Netanyahu’s government as a major partner.

Another possibility is that Netanyahu will form a narrow coalition based on partnership with Bennett and the ultra-Orthodox parties. But, even if the numbers work out, such a government would find it difficult to address Israel’s many domestic and external challenges.

So it is likely that Netanyahu will form a coalition with Lapid and former Foreign Minister Tzipi Livni’s Hatnuah party (which won six seats), along with some of his “natural” rightwing allies. It is difficult but not impossible to identify various compromises that would enable him to create (but not necessarily to maintain) such a coalition.

Lapid’s centrist platform can be reconciled with either the nationalistic Bennett or the ultra-Orthodox parties, but it would be extremely difficult to reconcile it with both.

If such a scenario materializes, Israel’s next government will be more moderate than the current one. Conflict with the Obama administration could be averted, and negotiations with the Palestinians could be resumed.

But such a coalition, composed of parties with contending agendas, would be unstable; the next election may come sooner rather than later.

In the meantime, the new faces in Israeli politics will be tested. Lapid will prove himself either a real leader or just another politician who briefly captured the fancy of Israeli centrists. Bennett, among other things a former chief of staff for Netanyahu, may or may not provide the Israeli right with a new leadership style.

There are important questions for Israel’s partners and adversaries as well. Will the Obama administration know how to deal with a weakened Netanyahu and a changing Israeli political landscape?

Will Palestinian leaders know how to encourage the new moderation in Israeli politics, or will they press too hard?

We will learn the answers to these questions in the weeks and months ahead. For now, the important point is that the election’s unexpectedly strong rebuke to Netanyahu means that they can be asked.

Itamar Rabinovich, a former ambassador of Israel to the United States (1993-1996), is currently based at Tel Aviv University, New York University, and the Brookings Institution. © 2013 Project Syndicate (www.project-syndicate.org)

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