After the indecisive result of yesterday's general election in Israel, Merrill Lynch analysts Haim Israel and Micha Goldberg ask whether the country will not find itself going to the polls again within a couple of years. The Kadima party led by Tzipi Livni won the most Knesset seats, with 28, but Likud leader Benjamin Netanyahu, whose party won 27 seats, is believed to stand a greater chance of forming a coalition. Such a coalition, however, is liable to be short-lived, in Israel and Goldberg's view.
"With no clear majority, the coalition is likely to include as many as six or even more parties, once again making it fragile and founded on lots of minority demands," the analysts write.
"It is just three years since the last elections, and we doubt whether the new government will survive for the full four years and nine months until the next scheduled national elections. A heavily fragmented coalition is likely to increase the prospect of another round of elections, possibly in late 2011 or early 2012."
As for the economic repercussions of the election result, Israel and Goldberg write, "A Likud-led coalition is likely to be more aggressive on fiscal easing, including additional tax cuts. Together with potentially hardline views on regional politics, these concerns may build pressure on the shekel in the short term. With inflation expected to remain low, the Bank of Israel might consider cutting interest rates à la Bernanke, all the way down to 0.25% from the current 1%."
Published by Globes [online], Israel business news - www.globes.co.il - on February 11, 2009
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