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(Bloomberg) — Prime Minister Benjamin Netanyahu claimed victory based on exit polls suggesting he could form a governing coalition even though the results showed him neck and neck with rival Isaac Herzog. A onetime Netanyahu ally critical of his economic record was poised to become the kingmaker. Both Netanyahu, chairman of the Likud party, and a lawmaker with Herzog’s Zionist Union ticket, said negotiations would begin with smaller parties to form governing alliances. Netanyahu, whose party had trailed in pre-election polls, sent a Twitter message calling the vote “a great victory for the Likud.” Israeli analysts gave the edge to the prime minister, who in the course of his campaign distanced himself from his 2009 agreement to work to establish a Palestinian state and clashed with the Obama administration over its Iran policy.
“If these numbers hold up, the most likely outcome is a narrow right-wing government,” said Mark Heller, a research associate at the Institute for National Security Studies in Tel Aviv. “It looks like Netanyahu will continue to be prime minister until the new government he forms falls apart.” Netanyahu’s Likud was set to capture 28 seats in Tuesday’s election, with Herzog’s Zionist Union taking 27, according to Channel 2’s exit poll. Two other surveys by Channel 1 and Channel 10 showed the parties tied at 27 seats. Final results are to be announced late Thursday.
With both sides falling far short of a parliamentary majority, the stalemate raised the prospect of weeks of negotiations to form a coalition. In the coming days, President Reuven Rivlin will ask party leaders who they recommend as prime minister, and next week at the earliest he will assign someone to build the next coalition. Under Israel’s electoral system, the task goes to the party deemed best able to form a government and doesn’t automatically go to the faction with the largest number of parliamentary seats.

Unity Government

Rivlin has said in private conversations that he favored formation of a unity government including the two biggest parties, Israeli media have reported. Herzog’s party maintained it would come out on top and wouldn’t join a coalition headed by Netanyahu, who is seeking a fourth term. “Negotiations have already begun to form a government” headed by Herzog, Merav Michaeli, a lawmaker from the Zionist Union, said in an interview in Tel Aviv. “This is what Herzog is good at –- bringing people together.” Ayman Odeh, chairman of the joint list of Arab parties that won about a dozen seats in all three polls, told Army Radio the group wants to “contribute our part to preventing the establishment of a right-wing government.” Moshe Kahlon, a former Likud minister whose new Kulanu party will enter parliament with 9 or 10 seats according to exit polls, may play a key role in deciding who forms the next government. While several smaller parties have already declared their backing for either Netanyahu or Herzog, Kahlon hasn’t said who he would support.

Gap Closed

Netanyahu may be favored by smaller parties such as Jewish Home that share his skepticism toward peace talks with Palestinians. He campaigned on that theme in the final days, vowing not to allow a Palestinian state now as he sought to stave off defections to parties with a similar platform. The exit polls suggest the strategy worked, enabling Netanyahu to close a gap that had opened up during the campaign. Pre-election surveys had showed Netanyahu trailing Zionist Union by three to four seats. Opposition parties attacked Netanyahu over the economy as well as the faltering peace process. Output grew at the slowest pace since 2009 last year, while house prices have surged in the past decade.
–With assistance from Yaacov Benmeleh in Tel Aviv.

To contact the reporters on this story: Amy Teibel in Jerusalem at ateibel@bloomberg.net; Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net Amy Teibel, Ben Holland