The need to create coalition governments means that minority parties can hold tremendous sway in the coalition governments - the religious parties for example can threaten to leave the government if their policies aren't enacted/followed, for instance).
A few times in Israel's history, the two biggest parties have joined together to form a unity government - particularly in times of need.
Prime Minister Benjamin Netanyahu believes this was the right time to form a unity government, and that gives Netanyahu the numbers in the Knesset to take a policy stance that might push some of the minority parties to bolt. It convinced rival party Kadima to join in a unity government so that there is no need to hold new elections to form a new government.
No elections, Kadima joins government: In a dramatic move, the Likud and Kadima parties agreed on a unity government early Tuesday, averting the prospect of early elections.The move was also a tactical ploy by both Kadima and Likud - the two biggest party blocs in the Knesset to thwart the ascension of a new party headed by Yair Lapid. For Kadima, the move prevents a potentially serious blow to the party's standing in the Knesset. For Netanyahu and Likud, the move strengthens its hand in dealing with a variety of issues, including the contentious move to expand the mandatory draft to include all Israeli citizens, eliminating the exclusion for the ultra-orthodox.
Prime Minister Benjamin Netanyahu and Kadima Chairman Shaul Mofaz finalized the surprising unity agreement hours before the Knesset was expected to approve its own dissolution and set September 4th as the date of the next elections.
PM Netanyahu announced that Kadima’s Mofaz will be appointed deputy PM and minister without portfolio, while also being included in Israel’s security cabinet. Mofaz told Kadima members the party will likely get more portfolios later on, apparently in 2013. As part of the deal, Kadima will also chair the Knesset’s Economics Committee.
Some US media outlets are playing the angle that the coalition unity government deal is designed with Iran in mind. That completely ignores the fact that the deal opens up the opportunity to reform the IDF and undertake other economic policy reforms that it could not do if the religious parties were able to force new elections.