In a sign of how tense the talks were, the negotiating teams decided not to hold a formal ceremony to sign the agreements, Yuval Karni reported in the more mainstream Yediot Ahronot paper. It was decided that the agreements would be signed by fax, so that the representatives of the parties would not even see each other at a signing ceremony.
The weeks of negotiations illustrated Netanyahu's limited room for maneuvering, and the significant leverage his partners will wield.
Forming a joint front, Lapid and Bennett forced the prime minister to keep the ultra-Orthodox parties, his traditional ally, out of the coalition. It is only the second time in the past 35 years that they have been in the opposition.
Lapid, a critic of excessive government spending, also forced Netanyahu to scale back the size of the Cabinet. The move had the added effect of infuriating members of Netanyahu's Likud Party by reducing the number of available Cabinet posts.
In a statement Thursday, Yesh Atid said its first order of business would be to submit a bill on reforming the draft system. It also said it would require all schools to teach a "core curriculum" that includes math, science and English. Ultra-Orthodox schools have frequently neglected these areas. The statement also promised "extensive economic steps" to integrate the ultra-Orthodox into the work force.
Lapid's party will control the finance and education ministries, giving him significant influence over budget and school policies. But taking away benefits from the ultra-Orthodox will not be easy. Netanyahu will be reluctant to take on his traditional allies, knowing he could rely on them again in the future.
The ultra-Orthodox, who have been able to mobilize tens of thousands of people into the streets, are already promising to put up a fight. "Our first mission is to topple this government," Arieh Deri, leader of the ultra-Orthodox Shas party, told Israel's Army Radio station.
Dealing with the Palestinian issue will be no easier. Netanyahu's own Likud Party is dominated by hard-liners who oppose significant concessions to the Palestinians, while Bennett, a former head of the West Bank settler movement, takes an even tougher line, calling on Israel to annex large chunks of West Bank territory that would have to be part of any future Palestinian state. He is sure to use his control over the Housing Ministry to try to build more settlement homes.
On the other hand, Lapid announced Thursday that the new coalition agreement promised a commitment to returning to the negotiating table with the Palestinians. Livni, who is to be Netanyahu's chief negotiator, ran for office on a platform devoted to reaching peace.
Netanyahu will be hard-pressed to balance these conflicting forces, yet there are some reasons for optimism.
After presiding over four years of deadlock and international isolation over the issue, Netanyahu has signaled he is eager to restart negotiations under his new government.
The Palestinians demand all of the West Bank, east Jerusalem and Gaza Strip — areas captured by Israel in the 1967 Mideast war — for a future state. They have demanded a freeze in settlement construction and a commitment to make Israel's 1967 lines the basis for a future border.
Saeb Erekat, the chief Palestinian negotiator, said the Palestinians would have "no problem" talking to Lapid or Livni.
"But if we want to negotiate with the Israelis, the government should accept the two-state solution based on the 1967 borders and implement its obligations like the settlement freeze" he said.
The arrival of Obama next Wednesday could raise pressure on Netanyahu to float some new ideas for restarting talks. Though Obama is not bringing any bold peace plan, he will be meeting separately with both sides in order to lay the groundwork for future talks.
"Netanyahu is going to have Obama visiting next week in Jerusalem and therefore he had to have a more moderate, at least by outlook, government," said Gayil Talshir, a political scientist at Hebrew University. "So the government in terms of Livni getting to be a minister in this government and Lapid being more moderate, it's definitely more moderate when you look at it from the outside."
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