Top 2 Israeli Parties Agree to Form Coalition Cabinet : Eight New Settlements Tied to Deal

Israel’s ruling Likud and Labor parties agreed on terms today for a new national unity government led by right-wing Prime Minister Yitzhak Shamir, politicians from both parties said.

Labor Party Secretary-General Uzi Baram said the parties overcame the last obstacles by agreeing that eight new settlements would be established in the occupied territories in a year and that Labor would chair the powerful parliamentary Finance Committee.

Likud negotiator Moshe Katzav said the parties had been spurred by the shock of last week’s U.S. decision to open talks with the Palestine Liberation Organization, despite Israeli opposition.

“Out of a sense of responsibility for the fate of the state and given the latest developments, Likud decided to make an extra effort to bring about a broad, unity government headed by Prime Minister Shamir for four years,” Katzav said.

Under the accord, Labor leader Shimon Peres will remain vice premier and switch from the Foreign Ministry to be finance minister. Labor’s Yitzhak Rabin will remain defense minister and Likud’s Moshe Arens will become foreign minister, political sources said.

The accord, which officials said would be initialed on Tuesday, came 49 days after the inconclusive Nov. 1 general election in which Likud won a one-seat edge over Labor with religious parties holding the balance of power.

Israel Radio said hard-line Trade and Industry Minister Ariel Sharon quit the Likud negotiating team, accusing Shamir of breaking his word to far-right and religious parties.

The accord on new settlements could put Israel under fresh international pressure. The United States has condemned the settlements in the past as illegal and an obstacle to peace.

Israel Radio said that under the coalition accord, Labor and Likud undertook not to try to form a narrow government without each other during the lifetime of the new Parliament.

It also said both major parties would have to agree on the participation of all other parties in the coalition, a clause that would apparently enable Labor to block the entry of extreme-right parties.

Likud parliamentarian Ehud Olmert, tipped for ministerial office in the new government, told reporters he did not believe any of the small rightist parties would join.

Israel has been ruled by a national unity government since tied elections in 1984, with Peres and Shamir alternating for two years each as prime minister.

However, Shamir will be premier for the entire duration of the new government, which will have a more hawkish complexion reflecting the dominance of right-wing and religious parties in the new Parliament, political sources said.

After the Labor-Likud accord was reached, Shamir met leaders of the four religious parties to offer them a limited role in the new government.

The ultra-Orthodox Agudat Israel, with five parliamentary seats, could go into opposition after Likud agreed to give Labor the finance committee chair, previously promised to the religious party, the sources said.