In this post, I described the procedure for replacing Israeli Prime Minister Ehud Olmert as a four-step process. They're now in step 4, negotiating a coalition among the parties who won parliamentary seats in last week's general election. But step 4 really has a step 4(a) and a step 4(b).
President Shimon Peres performed step 4(a) today, when he designated former Prime Minister Benjamin Netanyahu, leader of the Likud Party, to try to put together a coalition government. If successful, Netanyahu would return to the top job, which he held from 1996 to 1999.
Now, the main question is whether those negotiations (my "step 4(b)") will result in a right-wing coalition between Likud, Yisrael Beiteinu, and several smaller parties, or a broader coalition including the centrist Kadima Party and the left-wing Labor Party, which are the main partners in the current governing coalition.
Both Netanyahu and Yisrael Beiteinu's leader, Avigdor Lieberman, have said they want such a broad coalition. But Foreign Minister Tzipi Livni, the Kadima leader, has resisted that idea, without totally ruling it out.
Two major policy considerations are involved:
Peace negotiations with the Palestinians. Labor and Kadima are more supportive of the two-state solution, i.e., setting up an independent Palestinian state in the Gaza Strip and West Bank, than Likud. That was the main reason why then-Prime Minister Ariel Sharon left Likud and founded Kadima in 2005. Livni is wary of taking Kadima into a Netanyahu-led coalition that might at best pay lip service to that goal.
Secular vs. religious government. Yisrael Beiteinu's support largely comes from emigrants from the Soviet Union. They tend to be less religious than many other Israelis. That party opposes the power of the Orthodox rabbis over, for example, marriage laws. That complicates the negotiations, because religious parties with which Yisrael Beiteinu agrees on the Palestinian issue, don't share its secular outlook.
Netanyahu faces a six-week deadline to form a government. If he fails, another potential prime minister (probably Livni) could be designated by joint action of the parliament (Knesset) and Peres. Then, if she fails, a new election would be held.