This originally started as a comment, but as it got longer I decided I would, after over a year on dkos, decide to write a diary on a subject.
Anyway, I thought I would give a quick "gut reaction" to what the exit polls are saying. At this point, the center right Kadima, founded by Ariel Sharon just before his stroke, is being declared the winner with anywhere between 29-33 seats. Second place is Labor with anywhere from 19-23 seats. Likud has been decimated, with 11-15 seats. It may even fall into fourth behind Yisrael Beitenu, a party run by far right populist demagogue Avignor Lieberman.
What's the future for the parties in Israel? What happens next? More below....
Kadima - Did not do as well as originally hoped for. But they have enough seats to lead a coalition. Not a stellar performance, but good enough. Olmert calls the shots from here on out, and Tzipi Livni can groom herself to be Israel's second female PM (though she'll face competition from others to be sure).
Labor - Appears to have done better than expected, vindicating choice of Peretz as party chair. Still a far cry from the power they used to be. But at least they are alive.
Likud - The big losers of the night by far. May not even take third when all is said and done. I thought Labor had a collapse in 2003. This was even worse.
Yisrael Beitenu - Surprised a lot of people in late polls, and appears to have lived up to them. But unless Lieberman backs off his calls for ceding Arab populated towns to the PNA, he's sitting in the minority.
Shas (Sepharidic ultra orthodox party) - Shas has shown that they have a regular and solid constituency that can get them 10 seats or so every election. Enough to give themselves a claim to their share of patronage if they play their cards right.
NU/NRP (far right religious zionist party) - Mediocre performance, will be sitting and whining in opposition.
United Torah Judaism (Ashkenazi ultra orthodox party) - The Ashkenazi religious party doesn't have the pull that Shas does. But they may be invited in to the government anyway.
Gil (Pensioners Party) - The shocker of the night. A single issue party (raising pensions) which looks to pick up 6-8 seats. My guess is they will now be invited into the government.
Meretz - Still relegated to just a few seats. Will Olmert bother inviting them into government? He knows they'll vote to approve any withdrawals, so why bother giving them any portfolios and tarring yourself with an appeasement image. Note to kossacks: Yossi Beilin is someone that we would all like. But he is DESPISED in Israel.
Arab Parties - Again pick up a few seats. As long as they don't accept the formulation of Israel as a Jewish and Democratic state, they will never be invited into the government.
What happens from here?
Well it's clear that Kadima will invite Labor into the government. Because Kadima will probably be only in the low 30s, it will have to offer at least one of the "prize" ministries to Labor (Foreign, Defense, Justice, Finance, Education). My guess is the Education ministry goes to Labor.
From there it should be a relatively simple jump to get 60, or even more. As noted above, the Pensioners Party will probably be invited into the government, as no one really opposes their platform. My guess is that after that, Olmert will look to the ultra-orthodox parties to cement his majority. Shas's spiritual leader, Rabbi Oveida Yosef, has essentially ordered party chair Eli Yishai to get into the government at all costs. For all the talk of them being "rightists" Shas does not really have an attachment to the settlements or holding onto territories. Rabbi Yosef has now been looking in from the outside for three years, and wants his child allowances and educational funding back. Shas will easily bend on territory to get their government funding. And my guess is that United Torah Judaism also gets in. This also gives the government at least a facade of religious approval for its actions.
Some people are asking "well why not just form a center left block with Kadima, Labor, Pensioners, and Meretz?" That may happen but I don't think that it will. The problem is that what YOU and I like is not the same as what Olmert likes or what most Israelis like. Meretz has a small following and is led by a man whom many Israelis consider to have led them into disaster and was also accused of clouding the negotiations with the Palestinians with his business interests. Quite simply, Olmert is not a leftist and doesn't want to give the right wing opposition the chance to tar him with that label. My guess is that Meretz is left on the outside. Doesn't matter to Olmert, because he knows they will vote for any withdrawal he decides to do (same with the Arab parties).
Anyway, this is not going to be my favorite government, but one I can live with. It's one that can negotiate with the Palestinians if the Palestinians express a willingness to do so, and one that can pull out of the isolated settlements and draw its own border if not. It'll do for now.