As I wrote this weekend, I expected Israel to hold new elections because Kadima could not get enough support in the Knesset to form a new government. Today, the Israeli President, Shimon Peres, announced that Israel will hold new elections at the end of January/beginning of February to choose a new ruling government.
Foreign Minister Livni could not form a coalition government, and I fully expect that Kadima will lose serious ground in the election. Watch for Likud to gain seats, perhaps in sufficient numbers to be in a position to form a coalition government.
Keep in mind that no Israeli political party has ever been in a position to govern without a coalition, so the winning political party will have to make concessions to other parties to form the government. In Kadima's case, they simply could not submit to Shas' terms, which included a prohibition on putting Jerusalem's status up for negotiation with the Palestinians. Kadima appeared willing to divide Jerusalem, and Shas wanted no part of that.
Israel clearly needs new leadership, as PM Olmert has run Kadima into the ground and undermined Israel's national security with a series of disastrous policy prescriptions, including a steadfast refusal to fully engage the terrorists of Hamas and Fatah for their rocket war against Israel from Gaza, and the disastrous war in Lebanon begun by Hizbullah that ended with Hizbullah in a stronger position than before because of a reliance on the UN to do what it has never done in the past - disarm the Islamic terrorist group. Hizbullah has stockpiled weapons and has thoroughly compromised the Lebanese government.
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