A Daily Analysis
By Marc Schulman

September 21, 2008- Olmert Resigns

Ehud Olmert has resigned as Prime Minister of Israel. In process that began after the failure of the Second Lebanon War and intensified with the widening circle of investigations regarding Olmert's conduct before he became Prime Minister, he was forced to resign. Olmert's action today was the fulfillment of the promise he made before the summer to resign once Kadima had its primaries and elected a new head.

Olmert presented his resignation to President Peres, who is going this week to represent Israel at the UN (something that is itself unprecedented). The next step in Israel's political drama is now up to Peres. It is his responsibility to entrust one of the parties with the responsibility to form a coalition. With his departure to New York eminent, Peres has promised to work quickly. This evening he began his meetings with the representatives of all the parties and promised to decide before his trip who he will give that responsibility to. It is expected that this will be Minister of Foreign Affairs Livni, who won the Kadima primaries and has called for a quick transition. While the coalition talks go on, Olmert remains the acting Prime Minister.

There are three scenarios possible: 1. Livni puts together the needed coalition. 2. Livni does not put together a coalition and elections are called. 3. There is an outside but highly unlikely scenario that Netanyahu puts together an alternative coalition.
Livni must get two key players on board to build a coalition: Shas and the Labor party. Shas has all the normal difficulties, the major one going to the issue of child subsidies that Shas demands be reinstated to their previous levels. It was ironic today to see Netanyahu meeting today with the spiritual leader of Shas Rabbi Ovadia, telling him not to enter into a coalition with Livni since she will not give him back the subsidies. Reducing these subsidies happens to be one of Netanyahu's proudest (justifiably so) accomplishments as Minister of Finance. The seemingly most problematic person that Livni has to get to agree to entering the coaltion is Minister of Defense Ehud Barak, who has been acting very oddly. He refused to meet with Livni until late tonight, instead meeting with Netanyahu. His actions are odd from a number of vantage points. First it was he who insisted that Kadima hold primaries and select a new leader. If Barak was not going to agree to the selection, he could have said so and demanded in late spring new elections. Second there is very little day light between Livni's positions on key matters and those of the Labor party and thus continuing the coaliti on under Livni seems the obvious move. What and why Barak is up to is unclear. Two explanations present themselves. The first the Barak feels that under Livni, Labor's popularity will be further eroded, so much so that there will be little left of Labor afterward. The second that he does not like working with her, and can not see himself working for her. He rather take his chances on elections and if Netanyahu wins, the worse case scenario would result in him being Minister of Defense. The next few days should be interesting. Livini will have 40 days to form her coalition.