Israeli coalition negotiations to enter into extra-time

When she won the leadership of Israel's ruling Kadima party, Foreign Minister Tzipi Livni said she wanted to form a new government within 10 days, reported dpa.

One month on, the coalition negotiations are still in their early stages and about to enter into extra-time early next week.

"From this moment, because we have a state to run, we must act quickly ... We don't have much time to fool around with politics," Livni said after her election in September 17 primaries held to find a replacement for Ehud Olmert, who has resigned the premiership and party leadership to fight corruption allegations.

It has not proved so easy. The first 28 days allocated by Israeli law to form the new government end on Monday. Livni is expected to ask Israeli President Shimon Peres for a 14-day extension on Sunday.

She was charged with the task on September 22, a day after Olmert handed in his resignation and thus also that of his cabinet, which has since continued to serve as a transitional government until a new one is formed.

If Livni fails to form a new government by the final deadline of November 3, new elections will be held within 90 days, a year ahead of schedule.

So far, she has brought on board only the left-to-centre Labour Party, with 19 mandates the second-largest party after Kadima (29 mandates) in the 120-seat Knesset.

The current partners in the outgoing cabinet signed a draft coalition agreement earlier this week, which invented a new title for Labour leader and Defence Minister Ehud Barak - that of "senior deputy prime minister" - and grants him near veto powers.

Livni's options have boiled down to two: She can either form a majority government that would include the ultra-Orthodox Shas party, or a left-leaning minority government that would have to survive on the external support of Arab parties.

Livni's aides said they were "encouraged" by the past two days of coalition negotiations with the 12-seat Shas faction, the United Torah Judaism (UTJ)- a second ultra-Orthodox party of six mandates- and the dovish, five-seat Meretz party.

They told Israeli media she is confident she will be able to finalize the negotiations on time, ideally before the Israeli parliament returns from its summer recess on October 27 but if not by the November 3 final deadline.

Shas has two key demands: It wants a significant raise in child allowances for large families, and it wants a commitment that the government will not negotiate on Jerusalem with the Palestinians.

The issue of child allowances has always been a top priority for Shas, most of whose ultra-Orthodox supporters have large families to support.

Before a 2003 economic reform initiated by then finance minister Benjamin Netanyahu of the hardline Likud, a family with eight children under 18 years would receive over 4,000 Israeli shekels in child allowances per month (more than 1,000 US dollars under current exchange rates).

Under the reform, that sum was gradually reduced to under 1,200 shekels, or just over 300 dollars per month.

Netanyahu's plan aimed to encourage ultra-Orthodox Jews - many of whom devote their lives to full-time study of the Torah - to enter the work force and avoid raising large families while depending on the state to provide for them.

Netanyahu's economic reforms were widely credited for spurring Israel's strong economic growth of the past years and reducing unemployment, but critics said it targeted the socially weak.

Shas now demands an extra 1.5 billion shekels (some 400 million dollars) in child allowances for the 2009 budget. Livni has said she is willing to give 0.5 billion (some 135 million dollars).

Although her aides have vowed they will not give in to "extortion" and will not hesitate to opt for early elections or a minority government if necessary, they are now hinting she may be willing to compromise further. The cost of early elections would justify an additional raise in the child allowances, they argue.

As for the issue of Jerusalem, in front of television cameras Yishai continues to demand a written commitment against concessions on the holy city, while the left-liberal Meretz demands just the opposite: negotiations toward a peace deal on all of the core issues of the Israeli-Palestinian conflict.

A coalition with Kadima, Labour, Shas, the Pensioners Party and Meretz would give Livni a majority of at least 67 mandates in the 120-seat Knesset. Without Shas - nor the UTJ which has said it will not joint a government without its fellow ultra-Orthodox colleagues - she will have 60 mandates and lack the majority to pass decisions.

The question now is what price will she be willing to pay to Shas.

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