A month since Sharon’s Likud party scored an election victory, and after long negotiations, the 75-year-old Prime Minister has managed to form a rightwing government based on a coalition of 68 out of 120 Members of Knesset (Parliament). But this does not guarantee any lasting stability. As the stormy events of the new government’s first weeks in office show, it faces the same problems that toppled the last two governments - the bitter, brutal conflict with the Palestinians and the deepening economic crisis - and clearly has no more answers than its predecessors.

Swapping Labour for Shinui (a reactionary anti-religious populist party) and the ultra-orthodox parties for the National Religious Party and the extreme-rightwing National Union, with another reshuffle of portfolios, can hardly be the basis for any real change of course.

The latest round of hostilities

The suicide bombing which killed 15 and wounded about 40 Israelis in a Haifa bus on Wednesday 5 March an event that was waiting to happen. In February alone, according to Palestinian sources, 77 Palestinians were killed in the occupied territories, including 12 less than 18 years old, and 725 were wounded (among them 220 children). Most, if not all, Palestinian towns were under a tight closure, and a complete curfew was enforced occasionally.

The attempts made in Cairo over the last few months, in meetings of the different Palestinian factions sponsored by "moderate" Arab leaders, at reaching an agreed unilateral cease-fire (at least in Israel proper) had ended in failure, with Hamas and Islamic Jihad refusing to sign any such deal. With the ruling clique of the crumbling Palestinian Authority around Arafat (as well as other secular and former ‘Left’ organisations) failing to provide a viable strategy for the second Intifada, based on mass popular resistance, significant sections of the bitter and desperate Palestinian masses support suicide bombings in Israel as "the only way to hit back" and avenge the growing death toll.

The continued repression and constant pressure by the IDF and Shin Bet (security service), and the numerous arrests, incursions and executions could prevent most of the planned bombings, but only at the price of perpetuating the burning motivation that must eventually lead to a "successful" bombing. The new government’s knee-jerk reaction to the Haifa bus bombing fell short of the often repeated threats by Sharon and other leading cabinet members to deport Arafat, probably due to reluctance to embarrass the Bush administration by distracting international attention from Iraq. Instead, another incursion into the Gaza Strip was authorised, despite the fact that the last suicide bomber came from Hebron in the West Bank.

Large numbers of the Israeli Defence Forces entered the Jabalya refugee camp, reportedly to apprehend a medium-level Hamas militant. In the gun battles that ensued, a fire broke out in a store, and when people tried to extinguish the fire and treat previous casualties, a tank shell (as can be judged from a videotape of the incident) hit the crowded area, killing 8 civilians and wounding more than a hundred. In the well-worn tradition of recent years, actions by armed Palestinian groups are answered by overwhelming and brutal Israeli state terrorism, and vice versa.

The messy business of forming the government

Sharon, as well as most of the Israeli ruling class, initially tried to form a "national unity" government with Labour, which would have served two purposes: supplying (through figures like Shimon Peres) a cover of "respectability" to the government’s brutal policies in the occupied territories; and even more importantly, helping to block any opposition to the harsh neo-liberal policies deemed necessary for the Israeli working class in order to prevent "a financial meltdown". But Labour leader Mitzna probably realised that playing second fiddle to Likud in another national unity coalition could ruin his already defeated party, and that any reconstruction will only be possible in opposition. Sharon was not ready to offer a few significant concessions that could provide Mitzna with a justification for breaking his election campaign pledge not to join a coalition led by Sharon.

When left with the choice between the ultra-orthodox Shas and its arch-enemy, Shinui, Sharon preferred the latter, which has gone from 6 to 15 seats, over the former, which went down from 17 seats in the outgoing Knesset to 11 in the one voted in. Being a party of oriental Jews (who tend to be working class or poor), Shas could not be a stable partner in a government that plans vicious attacks on welfare. Shinui, on the other hand, with its openly Thatcherite policies and an Ashkenazi (European Jewish), more middle class electorate, fits in nicely.

But the inter-party negotiations turned out to be child’s play when compared with the Likud inner party power struggles. It all started when Sharon realised that the unpopular finance minister, Silvan Shalom, who has strong support in the party machine, had to be removed from his post. The search for a compensating portfolio began, but when the education minister refused to move to another ministry and make room for Shalom, the next option was to "kick him upstairs", to the foreign ministry. This meant removing Sharon’s main competitor, Netanyahu, from this prestigious position. He was offered the finance ministry, but initially declined. Only after being guaranteed expanded authorities, such as standing at the head of the new social-economic cabinet and in effect acting as a Prime Minister for the economy, Netanyahu accepted the switch. In the process, Sharon betrayed his closest ally, Ehud Olmert, who ran his recent election campaign, leaving him with a second rate portfolio. All this wheeling and dealing clearly showed Sharon as folding when faced with pressure, and taking decisions based on inner party politics regardless of the "national interest". In a recent poll 54% said Sharon did not handle the formation of the government appropriately.

Has anything changed?

The new government’s policies will not differ substantially from the previous one’s. Hardened attitudes on both sides of the national divide and the ongoing war of attrition between the IDF and Palestinian armed groups make a political settlement quite unlikely in the coming period. The appointment of the "moderate" Mahmoud Abas as Palestinian Prime Minister, while representing a concession by Arafat to American and Israeli pressure (as well as Palestinian public opinion, which has demanded an end to the cronyism and corruption of the Palestinian Authority ruling elite), does not signify a real turning point. The Islamic organisations have made it clear they will not subordinate themselves to his authority, and among the Palestinian masses he is seen as a representative of the corrupt ruling clique, the "Tunis gang". War in Iraq, even if it is short and "successful", will only aggravate tensions in the entire region.

On the economic front, at his speech presenting the new government, Sharon promised "difficult and painful decisions for us all". The fact that Labour and the ultra-orthodox parties were left out means they may try to play the card of opposition to the impending cuts, albeit in an opportunist and populist manner. Overall, this government has a more uniform rightwing character, both politically and economically. But there is also the possibility of Labour crawling back to government using the pretext of war in Iraq or a major wave of bombings, especially if Mitzna resigns from Labour leadership.

One thing that might paradoxically help the government in the first few months of office is the fact that most Israelis do not have high expectations from it. The poll quoted earlier asked people if the new government was capable of rescuing the country from the economic crisis. 30% said, "they were sure it wasn’t", with another 23% saying, "they thought it wasn’t capable of doing so. When asked whether the government was capable of stopping "Palestinian terrorism", 33% were "sure it wasn’t", and 31% thought it could do so only "to a small degree".

A third year of recession

The deteriorating economic crisis and its social consequences is preparing the way for big upheavals. The Israeli economy is now in a third consecutive year of recession, with no signs of improvement. Per capita GNP is at the 1997 level, and average wages have been eroded by 5.6% over the last year. All indexes are either stagnating or falling. Official unemployment is close to 11%, but the real figure is much higher and still climbing.

With consumption and other economic activity depressed, government revenues have taken a sharp fall, creating a gaping hole in the budget - around a 6% deficit. The solution, of course, will be even bigger cuts. Since benefits and allowances have been cut several times over the last two years, and defence expenditure is not likely to be cut significantly, the new target are public sector workers. Treasury plans include sacking up to 70,000 workers, or 10% of the public workforce, with an additional cut of up to 10% in the wages of remaining workers. This would entail the breaking of collective wage agreements that still defend most workers, and the Treasury is ready to pass special legislation for that purpose. Since this is direct attack on the Histadrut’s (the Israeli trade union federation) main power base, even its tame leaders will be forced to wage a struggle, and might be pushed from below to go further than they wish. A general strike, at least in the public sector, is almost inevitable at some point.

How long will the Coalition last?

All things considered, the new government, at least in its current composition, is not likely to survive for a longer period than its predecessors. It will face growing resistance to its neo-liberal social policies, and the bloody stalemate in the conflict with Palestinians will continue, with ups and downs. Sharon and the Israeli ruling class can be expected to whip up nationalism in order to deflect anger at rising poverty and unemployment, but this cannot succeed indefinitely. The coming period will see major struggles by workers, unemployed and the poor, both Jewish and Arab. There will be many opportunities for the members of Maavak Sozialisti (CWI Israel) to grow and increase our impact by energetically intervening in the class struggle and in the struggle against the occupation. We will find strength in the fact that our ideas and methods are the only ones who can offer a way out - the socialist alternative to war and slump.

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