WILL OLMERT AND PERETZ WEATHER THE STORM NOW THAT

C O N F I D E N T I A L TEL AVIV 000224

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/19/2012
TAGS: PGOV PINR IS
SUBJECT: WILL OLMERT AND PERETZ WEATHER THE STORM NOW THAT
HALUTZ IS GONE?

REF: TEL AVIV 25

CLASSIFIED BY: AMBASSADOR RICHARD H. JONES. REASON 1.4 (B/D)


1. (C) SUMMARY: THE RESIGNATION OF THE IDF CHIEF OF GENERAL
STAFF (COS) HAS PROMPTED INCREASED MEDIA SPECULATION THAT
OLMERT MAY RESHUFFLE HIS CABINET BEFORE THE PUBLICATION NEXT
MONTH OF THE INTERIM WINOGRAD COMMITTEE REPORT ON THE LEBANON
WAR, A REPORT THAT IS LIKELY TO FURTHER WEAKEN HIS PUBLIC
STANDING. NONE OF THE MAJOR POLITICAL PARTIES IN THE
GOVERNING COALITION ARE EAGER FOR EARLY ELECTIONS: SEVERAL
OF KADIMA'S TOP LEADERS ARE UNDER CRIMINAL INVESTIGATIONS
(OLMERT, HIRCHSON, HANEGBI, RAMON); THE LABOR PARTY IS
CONSUMED IN INTRA-PARTY POSTURING IN ADVANCE OF MAY 28
PRIMARIES; AND YISRAEL BEITEINU HAS YET TO PROVE TO ITS
SUPPORTERS THE WISDOM OF JOINING THE KADIMA-LABOR COALITION.
AGREEMENT BETWEEN PERETZ AND OLMERT ON A NEW IDF CHIEF OF
STAFF COULD PROVIDE AN OPPORTUNITY FOR RAPPROCHEMENT, BUT
MOST BETS ARE THAT EHUD BARAK WILL REPLACE AMIR PERETZ AS
DEFENSE MINISTER BEFORE TOO LONG. END SUMMARY.

--------------
HALUTZ IS OUT; WHO'S NEXT TO GO?
--------------


2. (C) THE RESIGNATION OF DAN HALUTZ AS IDF CHIEF OF STAFF
-- MORE THAN A MONTH AHEAD OF THE WINOGRAD COMMITTEE'S
MUCH-ANTICIPATED REPORT ON THE LEBANON WAR AND JUST A WEEK
BEFORE HALUTZ IS DUE TO TESTIFY TO THE COMMITTEE -- REMOVES
THE ONE PERSON THAT THE UPPER POLITICAL ECHELON, PARTICULARLY
PM EHUD OLMERT AND DEFMIN AMIR PERETZ, HAD HOPED WOULD BE THE
SCAPEGOAT FOR THEIR PERCEIVED FAILURE TO ACHIEVE ISRAELS WAR
AIMS LAST SUMMER. CORRUPTION INVESTIGATIONS AND SEXUAL
HARASSMENT SCANDALS HAVE FURTHER SOURED THE PUBLIC MOOD ON
THE COUNTRYS POLITICAL LEADERSHIP. NEARLY 85 PERCENT OF THE
ISRAELI PUBLIC THINKS THAT ALL OF THE CURRENT POLITICAL
LEADERSHIP IS CORRUPT, ACCORDING TO A JANUARY 10 DAHAF POLL
PRODUCED FOR THE KNESSET CHANNEL, AND ANOTHER RECENT POLL
INDICATED THAT THE PUBLIC WANTS BOTH OLMERT AND PERETZ TO
RESIGN. IN THE WORDS OF ONE KNESSET AIDE IN THE YISRAEL
BEITEINU PARTY: "HALUTZ WAS THE BUFFER ZONE -- AS FAR AS
ACCOUNTABILITY GOES -- BETWEEN OLMERT, PERETZ AND THE ARMY.
HE WAS GOING TO BE THE SCAPEGOAT. NOW THE WINOGRAD COMMITTEE
CAN'T PUNISH HIM AS HE IS ALREADY OUT. SOMEONE ELSE HAS TO
GO."

--------------
OLMERT AND PERETZ - WAITING FOR WINOGRAD
--------------


3. (C) THE VERDICT IN THE SEXUAL HARASSMENT TRIAL OF FORMER
JUSTICE MINISTER HAIM RAMON (KADIMA) IS EXPECTED TO BE
ANNOUNCED BY THE END OF JANUARY; HIS LIKELY ACQUITTAL WILL
PROVIDE OLMERT WITH AN OPPORTUNITY TO REINTEGRATE RAMON IN
THE GOVERNMENT AND RESHUFFLE PORTFOLIOS IN THE PROCESS.
EARLIER THIS MONTH, OLMERT FLOATED A TRIAL BALLOON REGARDING
THE POSSIBILITY OF FIRING PERETZ AS DEFENSE MINISTER AND
REPLACING HIM WITH FORMER PM EHUD BARAK (REFTEL). INTERNAL
KADIMA POLLING SUGGESTS SUCH A MOVE WOULD IMPROVE OLMERT'S
POLITICAL STANDING, ACCORDING TO A COALITION CONTACT, BUT IT
MAY NOT OFFER HIS SALVATION. THE ATTORNEY GENERAL'S DECISION
TO OPEN A CRIMINAL INVESTIGATION OF OLMERT'S HANDLING OF THE
PRIVATIZATION OF BANK LEUMI COMBINED WITH ONGOING
INVESTIGATIONS OF THE ISRAEL TAX AUTHORITY AND AS-YET
UNPROVEN ALLEGATIONS OF EMBEZZLEMENT AGAINST OLMERT'S CLOSE
ASSOCIATE, FINANCE MINISTER HIRCHSON, COULD RESULT IN
PARALYSIS AT THE TOP OF THE KADIMA PARTY, A SITUATION THAT
ANY ONE OF OLMERTS RIVALS COULD SEIZE ON. BUT THIS SORT OF
MELT-DOWN HAS YET TO PLAY OUT, AND OLMERT HAS REPUTABLE
ALLIES, SUCH AS BANK OF ISRAEL GOVERNOR STANLEY FISCHER AND
THE FORMER DIRECTOR-GENERAL OF THE MINISTRY OF FINANCE, WHO
SUPPORT HIS ASSERTION THAT HE DID NOTHING WRONG IN THE LEUMI
AFFAIR.


4. (C) DEFMIN PERETZ FACES INTERNAL PARTY PROBLEMS RATHER
THAN CORRUPTION SCANDALS. HE IS FIGHTING TO RETAIN
CHAIRMANSHIP OF THE LABOR PARTY, IN THE FACE OF CHALLENGES
FROM FORMER PM EHUD BARAK, WHO HAS ACTIVELY STARTED HIS
CAMPAIGN TO BECOME DEFENSE MINISTER; MK AMI AYALON; AND MK
OFIR PINES-PAZ, WHO QUIT THE LABOR PARTY OVER ITS
ACQUIESCENCE TO THE INCLUSION OF THE FAR-RIGHT YISRAEL
BEITEINU PARTY IN THE GOVERNING COALITION. ON JANUARY 18,
PERETZ FORCED THE LABOR PARTY CENTRAL COMMITTEE TO APPROVE
THE FIRST-EVER NOMINATION OF AN ISRAELI ARAB MUSLIM, MK
GHALEB MAJADLE, TO A MINISTERIAL POST (SCIENCE/CULTURE/SPORT)
IN HOPES OF SECURING BADLY-NEEDED ARAB VOTES IN ADVANCE OF
LABOR PRIMARIES ON MAY 28. PERETZ'S INTRA-PARTY GAMBIT MAY
BE FRUSTRATED, HOWEVER, BY OLMERT'S DESIRE FOR A BROADER
RESHUFFLE. THUS-FAR, OLMERT HAS REFUSED TO SUBMIT MAJADLE'S
PRECEDENT-SETTING APPOINTMENT TO HIS CABINET FOR APPROVAL.


5. (C) COMMENT: DESPITE THE UNPOPULARITY OF OLMERT AND

PERETZ, THE MAJOR POLITICAL PARTIES ARE IN NO MOOD FOR
ELECTIONS. BOTH LEADERS HOPE TO USE CABINET APPOINTMENTS AS
THE MEANS TO PRESERVE THEIR POLITICAL LEADERSHIP. HOWEVER,
IF THEY DECIDE TO WORK AT CROSS-PURPOSES, IT IS STILL
POSSIBLE THAT THE CURRENT COALITION MAY, IN THE WORDS OF ONE
KNESSET AIDE, "COME APART AT THE SEAMS." THE CURRENT
DELIBERATIONS CONCERNING THE APPOINTMENT OF A NEW IDF CHIEF
OF GENERAL STAFF WILL BE INDICATIVE OF WHETHER A
COLLABORATIVE OLMERT-PERETZ APPROACH TO DECISION-MAKING IN
THE ISRAELI GOVERNMENT REMAINS POSSIBLE. IF THEY ACHIEVE A
CONSENSUS, THEY MAY YET WEATHER THE IMPENDING STORM THAT THE
WINOGRAD REPORT WILL LIKELY UNLEASH IN SEVERAL WEEKS TIME.
END COMMENT.


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