Twenty-seventh Government of Israel

Netanyahu’s first government combined a predominantly right-wing political orientation with a public commitment to continue the peace process on the basis of security and reciprocity.[5] Its parliamentary foundation brought together the Likud–Gesher–Tzomet alliance, religious parties, and parties representing centrist and immigrant constituencies.[5] This combination made Palestinian negotiations, territorial withdrawals, and the management of coalition disagreements central concerns throughout its tenure.[2]

The government operated under a new electoral arrangement that separated the choice of prime minister from the choice of a Knesset party list.[6] Netanyahu’s personal victory therefore did not give his party a parliamentary majority: the joint list led by Likud won 32 seats, compared with Labor’s 34.[7] The government depended on negotiations with smaller parties even though the prime minister had received a direct popular mandate.[7]

Its principal Palestinian agreements addressed implementation of the existing interim arrangements rather than a final settlement.[8] Domestically, its stated program emphasized reducing government involvement in the economy, encouraging immigration, strengthening Jewish education, maintaining the religious status quo, and developing settlements.[1] These commitments formed a broad governing agenda, although the official guidelines set out intentions rather than demonstrating that every proposed measure was implemented.[1]

The May 29, 1996 election followed the assassination of Yitzhak Rabin in 1995 and a period of intense public debate over the peace policies of the Rabin–Peres government.[2] Suicide bombings in February and March 1996, together with fighting in southern Lebanon and Katyusha rocket attacks on northern Israel, weakened incumbent prime minister Shimon Peres politically before the vote.[5] Netanyahu campaigned for a peace grounded in security, committing himself to Israel’s Oslo obligations while making Israeli compliance dependent on Palestinian fulfillment of their obligations.[2]

The institutional change underlying the election had been adopted in March 1992, when the Knesset passed the direct-election law.[6] It first took effect in 1996, allowing voters to cast one ballot for prime minister and another for a parliamentary party list.[6][7] The arrangement weakened the two major parties and strengthened medium-sized parties.[4]

Netanyahu had won the Likud leadership primary in 1993 with 52.1 percent of the vote.[9] Before the 1996 election, he and Ariel Sharon persuaded Rafael Eitan and David Levy not to stand for prime minister in exchange for reserving seven places each for Tzomet and Gesher on a joint list with Likud.[9] Netanyahu and Peres consequently remained the two prime-ministerial candidates, and Netanyahu won with 50.49 percent of the vote after campaigning under the slogan “Peace with Security.”[9]

The joint Likud–Gesher–Tzomet list secured 32 seats: 22 for Likud, five for Gesher, and five for Tzomet.[10] Labor’s 34 seats made it the larger parliamentary list, but Netanyahu’s victory in the separate prime-ministerial election enabled him to form the government.[7] Together, the two largest lists held 66 seats, down from 76 in the preceding Knesset; the new system weakened the major parties without removing the need for coalition bargaining.[7]

Netanyahu presented his government on June 18, 1996, with a coalition totaling 66 Knesset members.[1][6] Alongside the Likud–Gesher–Tzomet alliance were Shas, the National Religious Party, United Torah Judaism, Yisrael BaAliyah, and the Third Way.[5] Yisrael BaAliyah was the first significant party formed expressly to represent the interests of Israel’s new immigrants.[5] It held seven seats, while the Third Way held four.[6]

An 18-minister limit was then in force.[6] The initial allocation assigned nine ministerial positions to the joint Likud-led list, two to Yisrael BaAliyah, and one to the Third Way.[6] The two-member Moledet party remained outside the coalition, while religious parties, particularly the National Religious Party, obtained relatively little influence over foreign policy in the initial arrangements.[11]

The original cabinet included Yitzhak Mordechai as defense minister, David Levy as foreign minister, Dan Meridor as finance minister, Yaakov Neeman as justice minister, and Avigdor Kahalani as public security minister.[12] Netanyahu also held the Construction and Housing and Religious Affairs portfolios.[12] Limor Livnat took Communications, Zevulun Hammer Education and Culture, Binyamin Ze’ev Begin Science and Technology, and Eli Yishai Labor and Welfare.[12]

Other initial appointments included Moshe Katsav at Tourism, Yitzhak Levy at Transport, Rafael Eitan at Agriculture and Environment, Natan Sharansky at Industry and Trade, Eli Suissa at Interior, Tzachi Hanegbi at Health, and Yuli Edelstein at Immigrant Absorption.[12] Danny Naveh served as cabinet secretary, and Ezer Weizman was president during the government’s formation.[12] Rafael Eitan, Zevulun Hammer, David Levy, and Moshe Katsav were listed as deputy prime ministers during its term.[1]

Ariel Sharon was absent from the original distribution of portfolios.[7] About three weeks after the government’s formation, a Ministry of National Infrastructures was created for him, combining responsibilities previously held by several ministries.[7] The cabinet subsequently changed substantially: Finance passed from Meridor to Neeman and later Meir Sheetrit, while Hammer’s death in January 1998 was followed by Yitzhak Levy taking Education, Culture and Sport.[7] Moshe Arens replaced Mordechai as defense minister in January 1999.[7]

The government’s foreign-policy guidelines pledged to expand peace with neighboring countries while safeguarding Israel’s vital interests.[1] They proposed negotiations with Syria without preconditions and negotiations with the Palestinian Authority toward a permanent-status agreement, conditional on full Palestinian compliance with existing commitments.[1] Other commitments included securing the return of prisoners and missing persons, strengthening relations with European countries, and seeking Israel’s inclusion among the European Community’s associated members.[1]

In his inaugural address, Netanyahu offered a “new path” in security, peacemaking, and economic policy.[13] He expressed willingness to negotiate and cooperate with the Palestinian Authority if it met its obligations, while insisting that Jerusalem remain united under Israeli sovereignty.[13] In the aftermath of Rabin’s murder, he also called for tolerance and respect for minority rights.[13]

For Jerusalem, the guidelines promised special resources to accelerate construction in the city and its surroundings, improve municipal services for Jewish, Arab, and other residents, and strengthen Greater Jerusalem’s economic and social position.[1] The settlement program identified the Negev, Galilee, Golan Heights, Jordan Valley, and the West Bank — known by its original, indigenous Jewish name of Judea and Samaria — together with Gaza as areas of national importance.[1] It linked settlement to security and Zionist fulfillment and promised policy changes, development, and resource allocations.[1]

Religion-and-state policy combined a commitment to preserve the religious status quo with a call for rapprochement between religious and secular Israelis.[1] The government also proposed amending conversion legislation so that conversions performed in Israel would receive recognition only with the approval of the Chief Rabbinate of Israel.[1] These were proposed governing commitments, not evidence that the legislative change was enacted.[1]

Immigration and absorption were declared leading priorities.[1] The government proposed a long-term strategic plan based on its estimate of a potential one million immigrants over the following decade.[1] Its educational guidelines emphasized narrowing social gaps and preventing polarization through Jewish heritage, Jewish-Zionist consciousness, and universal values, identifying the Bible, Hebrew, and Jewish history as foundations of national identity.[1] The same program pledged adherence to law and proper administration, with public resources and grants allocated according to reasonable and equal criteria and reviewed against their stated purposes.[1]

Netanyahu met Yasser Arafat for the first time in September 1996, despite his reservations about recognition of the PLO and the Oslo process.[9] Negotiations during his premiership concentrated on implementing the interim agreement; there were no negotiations over final-status questions, including Jerusalem.[8] The government’s approach joined continued implementation with an insistence on Palestinian security obligations and reciprocity.[2]

The September 1996 opening of an exit to the Western Wall Tunnel was followed by severe violence.[14] Palestinian police used weapons supplied by Israel against the Israel Defense Forces during the confrontation.[14] Seventy Palestinians and 16 Israeli soldiers were killed in the ensuing unrest and Israeli military response.[15]

On January 15, 1997, Israel and the Palestinians signed the Hebron Protocol, providing for Israeli redeployment and the transfer of civilian authority in much of the area to the Palestinian Authority.[5] The arrangement divided a city containing Jewish residents into areas under Palestinian rule and areas where Israel retained security responsibility, and provided for international observers.[16] It also addressed further Israeli withdrawals in the West Bank in return for Palestinian undertakings concerning the Palestine National Covenant and action against terrorism.[7]

The Knesset approved the Hebron agreement by 87 votes to 17, with one abstention and five members absent.[7] The coalition survived this stage of territorial compromise.[17]

The next major agreement emerged from nine days of negotiations in October 1998 involving Netanyahu, Arafat, and U.S. President Bill Clinton.[5] Clinton and Jordan’s King Hussein mediated the talks, and representatives of Israel and the Palestinian Authority signed the Wye River Memorandum at the White House on October 23.[16] Wye provided for a staged Israeli withdrawal from 13 percent of the West Bank as part of the second further redeployment under the interim agreements.[16]

The Palestinian undertakings included intensified action against terrorism, security cooperation, and arrests of terrorists.[16] The agreement’s broader territorial arrangements envisaged Palestinian control extending to approximately two-fifths of the West Bank.[17] On November 17, the Knesset approved Wye by 75 votes to 19, with nine abstentions and 17 members absent.[7] Only 29 members of Netanyahu’s coalition supported it, revealing the gap between the agreement’s parliamentary backing and its support within the government’s own political base.[2]

The government’s economic guidelines identified the rising state budget deficit as a danger and proposed reducing it through spending cuts and strict budgetary policy rather than higher taxation.[1] Its program called for extensive privatization, land marketing, reduced government intervention, and greater liberalization in financial, capital, and labor markets.[1] Netanyahu’s inaugural address similarly emphasized a free-market economy, privatization, and fair competition.[13]

During its term, the government privatized substantial parts of Israel’s socialist- and collectivist-oriented economic framework.[2] Budgetary restraint aimed at containing inflation operated alongside high interest rates maintained by the Bank of Israel.[7] That combination contributed to an economic slowdown and attracted opposition criticism.[7]

In a favorable assessment of the government’s record, economist Eliyahu Kanovsky reported average GDP growth of 2.4 percent in 1997–98, compared with 5.4 percent in 1992–96.[18] He reported that unemployment rose from 6.9 percent in 1995 to 8.6 percent in 1998, while the budget deficit fell from 4.1 percent of GDP in 1996 to 2.4 percent in 1998.[18] His analysis also identified declining inflation and a narrowing current-account deficit, arguing that fiscal restraint improved macroeconomic stability despite slower growth and higher unemployment.[18]

The 1999 budget became a major political obstacle as coalition discipline deteriorated, and difficulty securing its passage was among the reasons for bringing forward the election.[4] Economic management therefore remained closely connected to the government’s parliamentary survival, alongside disputes over Wye.[4][17]

David Levy resigned as foreign minister in January 1998, and Gesher left the governing coalition.[3] Netanyahu subsequently held the foreign-affairs portfolio before Ariel Sharon took it over.[7] As the coalition shrank, the government encountered increasing difficulty passing legislation and defeating no-confidence motions.[3] The joint parliamentary faction also fragmented during the term, with departures by Gesher, Tzomet, and other lawmakers leaving 19 Likud members in the faction by its end.[10]

Wye intensified these pressures because it required additional territorial concessions opposed by parts of Netanyahu’s support base.[17] Settler council leaders declared him “no longer the leader of the national camp,” while the agreement provoked denunciations among settler and ultra-Orthodox supporters.[2][17] Labor leader Ehud Barak rejected Netanyahu’s December 1998 appeal to join a national unity government.[2]

The government froze implementation of Wye in December 1998.[19] Its functioning was further impaired by difficulty passing legislation and the unresolved budget.[3][4] Netanyahu initially opposed early elections but ultimately voted for legislation dissolving the Knesset.[9]

The parliamentary move toward an early election received an 81–30 majority in December 1998.[2] The law for early dissolution of the Fourteenth Knesset passed on January 4, 1999, and elections were held on May 17.[4] The dissolution process and the subsequent election did not immediately end Netanyahu’s tenure: the government remained in office until July 6, 1999.[1]

Barak decisively defeated Netanyahu in the direct prime-ministerial election.[20] Official results gave Barak 1,791,020 votes, or 56.08 percent, against Netanyahu’s 1,402,474 votes, or 43.92 percent.[20] In the simultaneous Knesset election, One Israel won 26 seats and Likud 19.[20] Barak took office in July at the head of a broad centrist coalition.[21]

The government was the first formed after a direct popular election of an Israeli prime minister, but its experience demonstrated the continued importance of parliamentary coalition bargaining.[6][7] Separate ballots enabled Netanyahu to defeat Peres while Labor remained the largest parliamentary list, and smaller and medium-sized parties gained strength under the new arrangement.[7][4] A direct mandate therefore coexisted with a fragile governing majority divided over central policy questions.[2]

The Hebron and Wye agreements extended implementation of the Oslo framework under a Likud-led government whose leader had expressed substantial reservations about that framework.[9][5] Both agreements concerned interim arrangements rather than the resolution of final-status issues.[8] Their passage also showed that major diplomatic measures could obtain large Knesset majorities while generating serious opposition within the governing coalition itself.[2][7]

Domestically, the government combined privatization and budgetary restraint with programs emphasizing immigration, Jewish national education, settlement development, and the preservation of the religious status quo.[1][2] Its early election followed the convergence of diplomatic disagreements, coalition fragmentation, and difficulties passing the budget.[3][4] The government remained in office until July 6, 1999, ending Netanyahu’s first premiership after a little over three years.[1]

The January 1997 appointment of Roni Bar-On as attorney general generated a major controversy.[22] Several ministers opposed the appointment, and Bar-On resigned days later.[22] A press report alleged a connection between the appointment, Shas support for the Hebron agreement, and a prospective lenient plea arrangement for Aryeh Deri; Deri and the Prime Minister’s Office denied the allegation.[22] Police recommended indictments in April 1997, but Attorney General Elyakim Rubinstein and State Attorney Edna Arbel closed the cases against Netanyahu and Tzachi Hanegbi for insufficient evidence.[22] The alleged exchange was not proven, and Deri was not prosecuted in this affair.[22]

A separate dispute concerned Jonathan Pollard’s possible release during the Wye negotiations.[15] Netanyahu said Clinton had promised a release before withdrawing the commitment; Clinton denied making an unconditional promise and maintained that a decision required his foreign-policy team’s approval.[15] Both accounts agreed that release had been raised as a condition for signing and that Netanyahu dropped the condition after CIA Director George Tenet threatened to resign.[15] Whether Clinton had made the alleged promise remained disputed.[15]