KADIMA AND LABOR PLEDGE COALITION PARTNERSHIP:

C O N F I D E N T I A L SECTION 01 OF 04 TEL AVIV 002339

SIPDIS

E.O. 12958: DECL: 10/15/2018
TAGS: PREL PGOV PINR IS
SUBJECT: KADIMA AND LABOR PLEDGE COALITION PARTNERSHIP:
NEXT STEP SHAS?

Classified By: Political Counselor Marc J. Sievers. Reason 1.4 (B/D)


1. (C) Summary: Kadima and Labor negotiators reached a
draft agreement October 13 that would allow Tzipi Livni to
form a new coalition with Ehud Barak. After marathon
negotiations, Labor obtained several commitments from Kadima:
1) full partnership in the Syrian and Palestinian
negotiations; 2) modest budgetary commitments for pensions
and commitments not to reduce defense spending or increase
university tuition. Barak obtained status as the "senior
Deputy PM" and a laundry list of commitments spelling out
what this will mean in the day-to-day management of the
government. Now that Livni has Barak on board, she is
focusing on bringing Shas, and perhaps Meretz and UTJ into
the coalition as well. Livni has deployed Shaul Mofaz to
court Shas, but she'll need her checkbook too, as Shas is
seeking a minimum of 800 million to 1 billion shekels (NIS)
for family allowances as their price for entry. Livni's
first 28-day time period for forming a coalition is due to
expire on October 20, and most insiders predict she will
request from President Peres the additional 14 days that are
permitted by law. There is also speculation that Livni may
instead decide to go to early elections. Meanwhile, Olmert
continues as caretaker PM. End Summary.

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LIVI AND NETANYAHU COURT SHAS
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2. (C) The Kadima-Labor agreement paves the way for Livni to
ramp up her efforts to bring the Shas Party on board as the
next step in her effort to put together a viable coalition.
Opposition leader Netanyahu (Likud) has rebuffed Livni's
reiterated offer to join the government unless and until
there are early elections. On October 13, Netanyahu met with
Shas spiritual leader, Rabbi Ovadia Yosef, to urge Shas not
to join a Livni government and to support early elections.
Although Shas political leader Eli Yishai has not yet engaged
in negotiations with Livni despite her phone calls and an
invitation to discuss terms during the Jewish holiday week of
Sukkot, it appears from press reports that two trusted
advisors of Rabbi Yosef are in contact with Kadima -- an
indication that Shas has yet to decide which way it will go.
Reports that Kadima has dangled offers of 400-500 million NIS
for family allowances have been countered by Shas resistance
to begin dealing about terms that are below 800 million NIS.
On October 16, Kadima deployed Shaul Mofaz to contact Yishai
and Mofaz reportedly told Yishai that Shas would be a
"strategic partner" in the coalition. Kadima contacts have
told poloff that they do not think it will be possible to
form a viable coalition without Shas. Opposition contacts
made a similar point to Pol/C, noting that a narrow coalition
without Shas would be unstable and unlikely to last a year.

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UTJ WILL PROBABLY STICK WITH SHAS, WHILE
MERETZ AND THE PENSIONERS TALK TO KADIMA
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3. (C) Although a "narrow" government of just 60 MK's
comprising Kadima (29),Labor (19),the Pensioners (7) and
the left-wing Meretz Party (5) is unlikely, Livni's team is
nonetheless reaching out to Meretz as well as United Torah
Judaism (UTJ),the ultra-Orthodox Ashkenazi party that has
six seats. Most observers think it is unlikely that UTJ will
do a separate deal absent Shas. In fact, one of UTJ's
spiritual leaders, Rabbi Yosef Shalom Elyashiv, has flagged a
potentially bigger, theological problem in having
ultra-Orthodox (Haredi) parties serve in a government led by
a woman. Meretz Party leader Haim Oron acknowledged in a
recent radio interview that "if the government decides not to
address the subject of Jerusalem, (then) it is clear to us
that we won't join (it)." The Meretz position is squarely at
odds with the Shas position that Jerusalem should be excluded
from negotiations with the Palestinians. Meanwhile, Pensioner
leader Rafi Eitan stated publicly that he is skeptical of
Livni's chances to bring the ultra-Orthodox parties on board,
and assumed "that we're headed towards elections."


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BIBI STILL WANTS ELECTIONS,
BUT OPEN TO NUG AFTERWARDS
--------------


4. (C) A key Likud advisor told POL/C October 15 that
Netanyahu supports elections as early as possible since Likud
does not believe Livni will have a genuine popular mandate if
she manages to form a government. The advisor also argued
that setting a date for elections now or in the near future
would enable Israel to have a new government around the time

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that the new U.S. administration takes shape, making it
easier for the two to "deal with critical issues" such as
Iran together. Netanyahu supports a national unity
government after elections, and would be willing to work with
Livni and Barak. Such a government could expect to serve
three years and bring stability to Israeli policy, in the
Likud view. The advisor commented that Netanyahu does not
believe his own polls and concedes the possibility that Livni
might beat him in an election, but he would still be prepared
to join her coalition once it has a popular mandate. The
Likud advisor noted that a senior Livni political advisor,
Eyal Arad, maintains a channel with Likud and has advocated
that Livni should go to early elections.

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DETAIL ON LABOR-KADIMA AGREEMENT
--------------


5. (SBU) Barak's negotiator, former Labor MK Efi Oshaya, and
Kadima MK Tzachi Hanegbi concluded marathon negotiations and
signed a coalition agreement for the 32nd government between
their two respective parties on October 13. The agreement
they signed will, according to the text, "supersede any
subsequent agreements" between Kadima and other potential
coalition members. It will serve as a supplement to the
coalition guidelines that were agreed by Olmert and his
coalition partners in May 2006.


6. (C) The key elements of the six-page-long Kadima-Labor
agreement are as follows:

-- Labor ministers will continue serving in their current
positions and Labor will maintain its positions and
chairmanships within the Knesset and within ministerial
committees. (Comment: This proviso will make it difficult
for Livni to entice UTJ to join the coalition, as they seek
the chairmanship of the Knesset Finance Committee, which is
currently held by Labor.)

-- The Labor Party chairman, Ehud Barak, will be the "senior
deputy prime minister" and will have a higher "rank" than any
other minister, regardless of their title. (NB: Labor MK
Ophir Pines-Paz criticized this point, noting that by law the
"Acting PM" position, currently held by Livni, is the one who
fills in when the PM is absent or incapacitated.) Should the
PM or the Vice Premier be absent, then Barak can chair
cabinet meetings.

-- Labor and Kadima will work in full harmony, mutual respect
and consultation, to include regular weekly meetings. (NB:
This is not new, but it maintains a precedent: Olmert and
Barak met weekly as well even when their relationship was
rocky.)

-- The PM will not use the authority vested in her by law to
fire any Labor minister unless the Labor chairman agrees. As
a corollary, if Barak asks the PM to fire a Labor minister,
then the agreement obliges her to do so. (Comment: This
proviso addresses a fear Barak had in June, when Olmert could
have dismissed Labor ministers for voting against the
coalition.)

-- If the PM sees a need to dissolve the Knesset, then she
will have to inform Barak with "appropriate notice." If the
Labor chairman is opposed to dissolving the Knesset, then the
PM will hold off doing so for seven days. If there is still
disagreement, then the PM can do as she sees fit. (Comment:
This proviso partially addresses Barak's fear that a Livni
government will be short-lived and leave Labor in the lurch
with snap elections.)

-- The coalition will seek legislation specifying that the
leader of the opposition need not be a Member of the Knesset.
(Comment: This move is destined to fail, as it controverts
the basic premise of the Israeli parliamentary system: that
one must be a member of the Knesset to function within it.
It is akin to Barak's insistence that his party recommend his
name to the President as the person best suited to be Prime
Minister -- even though the law requires that the PM be a
sitting member of the Knesset. One journalist honed in on
this proviso as indicative of Barak's paranoia about entering
Livni's government. End Comment).

-- Before the Cabinet Secretary determines the agenda (of
cabinet meetings),the PM will consult Barak to fully
coordinate issues -- with as much lead time as possible. If
Barak asks the PM to remove an issue from the agenda, she'll
put off raising it for 14 days. If the two can't agree on
controversial issues, then Labor can ask the ministerial
committees on national security affairs or social welfare
affairs to consider it first. If cases where an issue has

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already been discussed, Barak can ask the cabinet not to hold
a vote on it. Labor and Kadima must agree on a date for a
vote, but if there is not agreement, then the PM must wait at
least 14 days before setting a date for a vote. However, if
the PM is convinced of the need for an emergency vote, she
can do so. As a corollary, the PM and Barak need to agree on
the agenda for the ministerial committee on national security
affairs. They will establish a "framework" for consultations
on sensitive political and security issues to guarantee their
secrecy.

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FRIEDMANN KEEPS HIS JOB,
BUT POWER CIRCUMSCRIBED
--------------


7. (SBU) On the judiciary, the Kadima-Labor agreement did
not provide Labor will an explicit veto over controversial
judicial reforms that have been initiated by Justice Minister
Friedmann, but it does proscribe detailed arrangements for
all matters pertaining to policy in his arena:

-- Any change in the basic law or a constitution must be
mutually agreed by all coalition factions. Any legislation
regarding the judicial system (e.g., the Supreme Court)
requires agreement between Labor and Kadima. The government
will oppose any private member bills on these issues unless
previously agreed. The parties to the agreement will act to
guarantee the independence of the Israeli judicial system and
Supreme Court and oppose changes that undermine its status.

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PARTNERS IN PEACE NEGOTIATIONS
WITH PALESTINIANS AND SYRIA
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8. (U) On the peace process, the Kadima-Labor agreement
underscore that:

-- the parties commit to reach peace and security agreements
with all neighbors and agree that no negotiations or
political initiatives by any ministers in the coalition will
be undertaken without prior approval and coordination with
the PM. Barak will be the PM's senior partner in promoting
all diplomatic initiatives. There will be "complete
transparency and coordination." Responsibilities and the
framework for these negotiations will be agreed by Livni and
Barak after a government is formed.

Labor MK Pines Paz, a Barak rival, complained to the press
that the Barak's agreement made no explicit mention of
Annapolis or the voluntary West Bank settler
evacuation/compensation law, but it did provide broad policy
guidelines and goals for Labor and Kadima cooperation.

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MODEST BUDGET INCREASES
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9. (U) On financial issues, Labor won some modest
commitments from Kadima:

-- Pensions will be increased by 150 million NIS in 2009 and
another 400 million NIS in 2010.

-- The parties agree not to touch the defense budget;
decisions made by the previous government remain valid.

-- The PM will act to insure that higher education fees do
not rise and the PM will work with the finance ministry to
close the budget gaps to guarantee this goal.

-- Smaller sums will be allocated in the budget to daycare
(20 million NIS); 160 million NIS for wastewater treatment;
100 million NIS for natural disaster insurance and
agricultural investments (Comment: these appear to be
budgetary bones that Barak can through to his senior Labor
allies, Herzog, Ben-Eliezer, and Simchon, respectively.)

-- These agreements will be introduced into the 2009 budget
proposal between the first and second readings of the bill
and Labor and coalition parties will vote in favor. Within
two weeks of a new government, a detailed agreement on
working procedures to ensure coalition discipline will be
outlined.

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