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.


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