PERETZ VICTORY TO BRING LABOR VOTE ON COALITION

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006460 SIPDIS E.O. 12958: DECL: 11/09/2015 TAGS: PGOV PREL ECON IS ELECTIONS GOI INTERNAL SUBJECT: PERETZ VICTORY TO BRING LABOR VOTE ON COALITION MEMBERSHIP REF: A. TEL AVIV 6385 ¶B. TEL AVIV 6353 Classified By: DCM Gene A. Cretz for reasons 1.4 (b,d). ¶1. (C) SUMMARY: Less than 12 hours after Amir Peretz's surprise victory over Shimon Peres for the Labor Party chairmanship, the party leadership is moving ahead November 10 with plans for a meeting in two weeks of the party's 3,000-member Central Committee to vote on whether to remain in Prime Minister Sharon's governing coalition. All indicators say such a decision is too close to call at this point. The Peres camp will likely argue to remain in order to further peace efforts, and will seek to negotiate funding for socio-economic programs as the Party's price for continuing in the Government. Prime Minister Sharon, facing dissension within his own Likud Party, could take that tack or could opt himself to move for early elections now, while he remains clearly the most popular political figure in Israel. END SUMMARY. ¶2. (C) Histradrut leader Peretz, who campaigned on a platform of improving the economic well-being of Israelis, pursuing the peace process, and leaving the coalition, came from behind to beat interim Party Chairman Peres 42 percent to 40 percent in a three-way race with former leader Binyamin Ben-Eliezer. Party rules gave the win to the candidate winning at least 41 percent in a three-or-more-way race. Peretz became chairman immediately upon certification of the vote count. Peres loses the chairmanship, but retains his position in Sharon's Cabinet as Vice Premier. Peretz immediately reached out to Peres in a gesture of reconciliation and cooperation. As of mid-day November 10, Peres was contesting the results in what party officials say is a futile effort. ¶3. (C) As the vote indicates, Labor remains split between those who, along with Peres, favor remaining in the coalition to continue some form of peace process, and those who support the peace process, but want Labor to bolt over socio-economic issues. With the 2006 budget up for its first reading sometime within the next two or three weeks, the opportunity exists for those who want to remain in the coalition to try to negotiate increased funding of socio-economic programs as Labor's price for remaining. That tactic may or may not find a welcome reception. Prime Minister Sharon, who, according to confidants, has considered calling for early elections himself in order to squash the dissension within his own party, could opt for such negotiations, or could simply move to new elections now, while he clearly remains the most popular political figure in Israel. As for the budget, a call for new elections would allow for the government to function on the equivalent of a continuing resolution until a new government is formed (ref A). ¶4. (C) Labor Faction leader Ephraim Sneh and Peretz aide MK Yuli Tamir confirmed to Poloffs separately November 10 that party Secretary Cabel has already begun preparations for the party's 3,000 Central Committee members to meet on or about November 27 to vote on whether to remain in the government. Sneh, who personally favors leaving the coalition, predicted that the Central Committee will vote to leave the coalition and that the Labor ministers will turn in their resignations the next day. (Note: Sneh's view may be colored by the fact that, until mid-2004, he saw himself as the next Labor chairman, but was subsequently unable to secure sufficient party support even to win a Cabinet post when Sharon brought Labor back into the coalition in January 2005.) Sneh also predicted that, faced with Labor's departure, Prime Minister Sharon will opt for early elections rather than attempt to form a new coalition with, for instance, Shinui. He predicted that Likud will work out most of its internal differences and coalesce around Sharon. He discounted the idea that Sharon would take the half of Likud that strongly supports him and join it with the half of Labor that supports Peres to form a new party -- what observers refer to as the "big bang." ¶5. (C) Likud advisor David Sharan told Poloff November 10 that the Peretz victory has increased speculation and concern within Likud about whether the Prime Minister will leave Likud to form his own centrist party. David Sharan said some in Likud believe that the Prime Minister may fear that Peretz could draw an element of Likud voters, mainly those hurt by former Finance Minister Binyamin Netanyahu's economic measures, to Labor in the next election. Former Labor Party Chair MK Amram Mitzna told Poloff November 10 that Likud must now see that "it is the end of the game" for the coalition. Mitzna also dismissed the notion that Sharon will look to replace Labor with the Shinui Party, arguing that, as an opposition party, Shinui has nothing to gain by joining Sharon's government so close to the regularly scheduled elections of November 2006. Shinui MK Ilan Lebovitch told Poloff November 10 that his party's faction will meet November 11 to discuss their options. He said that some Shinui MKs will advocate that Shinui join the coalition if Labor leaves, but added that this option will likely not be approved. ¶6. (C) Then-candidate Peretz previewed to Poloff October 31 his intended actions if elected party chairman (ref B), saying that he would immediately initiate Labor's departure from the coalition, and build Labor as a strong alternative to Likud. Asked then about polls showing that a majority of Labor voters prefer to remain in the coalition, Peretz said that as Labor leader, he would convince his party that it is in its best interest to leave the coalition. Mitzna told Poloff that he sees nothing stopping Peretz from seeking Labor's departure from the government and that the "mood of the Labor Party" even before the primaries had been leaning toward leaving the government, even among most of the Labor ministers. He also predicted that the leaders of the major parties will meet soon to decide a date for elections. He characterized Peretz's win as the beginning of "a new era for the Labor Party," with Peretz as the "electric shock" that could either revive or "kill" the party. He also speculated that if Sharon were to decide to go to elections leading a new centrist party, Peretz would have to moderate his socialist economic policy or risk losing Labor voters to such a party. ********************************************* ******************** Visit Embassy Tel Aviv's Classified Website: http://www.state.sgov.gov/p/nea/telaviv You can also access this site through the State Department's Classified SIPRNET website. ********************************************* ******************** JONES