Israel Politics March 2021

Israel: Right-wing parties to emerge fortified following elections, but composition of next government unclear

Israel will hold general elections—the fourth in two years—on 23 March 2021, after the dissolution of the Knesset in December due to the failure to pass a budget in time. While right-wing parties seem certain to gain ground and are set to lead the next administration, the exact composition of the future government is still highly uncertain, with neither the pro- nor anti-Netanyahu camps projected to win a clear majority. Political instability is set to persist following the vote and further elections in the near term are a distinct possibility. While this will make it difficult for the future government to tackle the country’s longstanding structural deficiencies, economic growth should still be strong this year and next, supported by the world-beating vaccine rollout, stronger gas exports and a vibrant high-tech sector.

Incumbent Prime Minister Netanyahu’s Likud party is set to remain the largest in the Knesset by some distance after the elections, but even with the likely backing of several smaller right-wing parties, it is predicted to fall well short of a majority. The support of the Yamina party—which is politically unaligned—will thus be crucial to secure another Likud-led government.

The overtly anti-Netanyahu parties appear closer to securing an outright majority. However, they fall across an incredibly broad ideological spectrum, and include the centrist Yesh Atid, the newly formed right-wing New Hope party, the pro-Arab Joint List and the left-of-center Israeli Labor Party. As such, it will be difficult for such disparate voices to rally around a single candidate, and even if an anti-Netanyahu majority emerges following the elections, the votes of Yamina would likely still be key to form a government.

In any case, the next government is likely to be led by a right-wing party—either Likud, New Hope or Yamina. This should mean a continuation of broadly business-friendly policies and a focus on improving competitiveness. However, ongoing political instability appears all but assured given the fractured electoral panorama. This could complicate efforts to deal with the aftermath of the Covid-19 crisis, rein in the gaping budget deficit and fix structural issues such as an underperforming education system, subpar infrastructure and a low labor participation among Haredi Jews and Arabs.

The EIU gave their take on the political outlook:

“The electoral system encourages a multitude of political parties, with multiple realignments at every poll, making it difficult to forge stable coalitions. […] Mr Netanyahu is still the most likely candidate to form a government, despite his weakened position. Nonetheless, a unified stance between the anti-Netanyahu-right and the centre-left could lead to Mr Netanyahu’s ousting. Given Mr Netanyahu’s political dominance over the past decade, another period of instability and a further election are likely to follow, either under a new prime minister or, if he forms a government but is then convicted later in the forecast period, with another right-wing leader emerging, with similar policy positions.”

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