US embassy cable - 05TELAVIV6460

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006460 
 
SIPDIS 
 
E.O. 12958: DECL: 11/09/2015 
TAGS: PGOV, PREL, ECON, IS, ELECTIONS 2006, GOI INTERNAL 
SUBJECT: PERETZ VICTORY TO BRING LABOR VOTE ON COALITION 
MEMBERSHIP 
 
REF: A. TEL AVIV 6385 
 
     B. TEL AVIV 6353 
 
Classified By: DCM Gene A. Cretz for reasons 1.4 (b,d). 
 
1.  (C) SUMMARY: Less than 12 hours after Amir Peretz's 
surprise victory over Shimon Peres for the Labor Party 
chairmanship, the party leadership is moving ahead November 
10 with plans for a meeting in two weeks of the party's 
3,000-member Central Committee to vote on whether to remain 
in Prime Minister Sharon's governing coalition.  All 
indicators say such a decision is too close to call at this 
point.  The Peres camp will likely argue to remain in order 
to further peace efforts, and will seek to negotiate funding 
for socio-economic programs as the Party's price for 
continuing in the Government.  Prime Minister Sharon, facing 
dissension within his own Likud Party, could take that tack 
or could opt himself to move for early elections now, while 
he remains clearly the most popular political figure in 
Israel.  END SUMMARY. 
 
2.  (C) Histradrut leader Peretz, who campaigned on a 
platform of improving the economic well-being of Israelis, 
pursuing the peace process, and leaving the coalition, came 
from behind to beat interim Party Chairman Peres 42 percent 
to 40 percent in a three-way race with former leader Binyamin 
Ben-Eliezer.  Party rules gave the win to the candidate 
winning at least 41 percent in a three-or-more-way race. 
Peretz became chairman immediately upon certification of the 
vote count.  Peres loses the chairmanship, but retains his 
position in Sharon's Cabinet as Vice Premier.  Peretz 
immediately reached out to Peres in a gesture of 
reconciliation and cooperation.  As of mid-day November 10, 
Peres was contesting the results in what party officials say 
is a futile effort. 
 
3.  (C) As the vote indicates, Labor remains split between 
those who, along with Peres, favor remaining in the coalition 
to continue some form of peace process, and those who support 
the peace process, but want Labor to bolt over socio-economic 
issues.  With the 2006 budget up for its first reading 
sometime within the next two or three weeks, the opportunity 
exists for those who want to remain in the coalition to try 
to negotiate increased funding of socio-economic programs as 
Labor's price for remaining.  That tactic may or may not find 
a welcome reception.  Prime Minister Sharon, who, according 
to confidants, has considered calling for early elections 
himself in order to squash the dissension within his own 
party, could opt for such negotiations, or could simply move 
to new elections now, while he clearly remains the most 
popular political figure in Israel.  As for the budget, a 
call for new elections would allow for the government to 
function on the equivalent of a continuing resolution until a 
new government is formed (ref A). 
 
4.  (C) Labor Faction leader Ephraim Sneh and Peretz aide MK 
Yuli Tamir confirmed to Poloffs separately November 10 that 
party Secretary Cabel has already begun preparations for the 
party's 3,000 Central Committee members to meet on or about 
November 27 to vote on whether to remain in the government. 
Sneh, who personally favors leaving the coalition, predicted 
that the Central Committee will vote to leave the coalition 
and that the Labor ministers will turn in their resignations 
the next day.  (Note: Sneh's view may be colored by the fact 
that, until mid-2004, he saw himself as the next Labor 
chairman, but was subsequently unable to secure sufficient 
party support even to win a Cabinet post when Sharon brought 
Labor back into the coalition in January 2005.)  Sneh also 
predicted that, faced with Labor's departure, Prime Minister 
Sharon will opt for early elections rather than attempt to 
form a new coalition with, for instance, Shinui.  He 
predicted that Likud will work out most of its internal 
differences and coalesce around Sharon.  He discounted the 
idea that Sharon would take the half of Likud that strongly 
supports him and join it with the half of Labor that supports 
Peres to form a new party -- what observers refer to as the 
"big bang." 
 
5.  (C) Likud advisor David Sharan told Poloff November 10 
that the Peretz victory has increased speculation and concern 
within Likud about whether the Prime Minister will leave 
Likud to form his own centrist party.  David Sharan said some 
in Likud believe that the Prime Minister may fear that Peretz 
could draw an element of Likud voters, mainly those hurt by 
former Finance Minister Binyamin Netanyahu's economic 
measures, to Labor in the next election.  Former Labor Party 
Chair MK Amram Mitzna told Poloff November 10 that Likud must 
now see that "it is the end of the game" for the coalition. 
Mitzna also dismissed the notion that Sharon will look to 
replace Labor with the Shinui Party, arguing that, as an 
opposition party, Shinui has nothing to gain by joining 
Sharon's government so close to the regularly scheduled 
elections of November 2006.  Shinui MK Ilan Lebovitch told 
Poloff November 10 that his party's faction will meet 
November 11 to discuss their options.  He said that some 
Shinui MKs will advocate that Shinui join the coalition if 
Labor leaves, but added that this option will likely not be 
approved. 
6.  (C) Then-candidate Peretz previewed to Poloff October 31 
his intended actions if elected party chairman (ref B), 
saying that he would immediately initiate Labor's departure 
from the coalition, and build Labor as a strong alternative 
to Likud.  Asked then about polls showing that a majority of 
Labor voters prefer to remain in the coalition, Peretz said 
that as Labor leader, he would convince his party that it is 
in its best interest to leave the coalition.  Mitzna told 
Poloff that he sees nothing stopping Peretz from seeking 
Labor's departure from the government and that the "mood of 
the Labor Party" even before the primaries had been leaning 
toward leaving the government, even among most of the Labor 
ministers.  He also predicted that the leaders of the major 
parties will meet soon to decide a date for elections.  He 
characterized Peretz's win as the beginning of "a new era for 
the Labor Party," with Peretz as the "electric shock" that 
could either revive or "kill" the party.  He also speculated 
that if Sharon were to decide to go to elections leading a 
new centrist party, Peretz would have to moderate his 
socialist economic policy or risk losing Labor voters to such 
a party. 
 
 
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