New government to push peace efforts onto back burner

The coalition will be the first in years without ultra-Orthodox parties and one that appears set to put peacemaking with the Palestinians on the back burner.

The administration is expected to end automatic draft exemptions for ultra-Orthodox seminary students.

Although Mr Netanyahu's Likud-Yisrael Beitenu bloc emerged as the biggest faction in the January 22 election, he has struggled to form a coalition with the necessary majority in parliament.

The PM's courting of ultra-Orthodox parties was scuppered by his coalition partners who didn't want to sit in government with them.

Likud is teamed up with two parties led by newcomers who made big election gains.

Yesh Atid, founded by former TV personality Yair Lapid, won 19 seats on a platform promising relief to Israel's struggling working class and an end to draft exemptions.

As head of the second largest party in parliament, Mr Lapid will serve as finance minister.

Yesh Atid will also control the Education Ministry.

Ominously, the Jewish Home party led by millionaire settler Naftali Bennett will control the housing and trade ministries.

Mr Netanyahu's party will retain control of the defence and interior ministries.

Economic issues weighed heavy in the election, but the parties are at odds over peace with the Palestinians.

Mr Lapid said he would not sit in a government that is not making a serious effort to reach peace.

But his campaign made little mention of Palestine, focusing almost entirely on his social and economic agenda.

Mr Bennett opposes any concessions to the Palestinians and has even advocated annexing parts of the West Bank.

Former foreign minister Tzipi Livni, who leads a small party publicly committed to peace, joined Mr Netanyahu's coalition last month with promises that she would be chief peace negotiator.

But the Jewish Home party does not want Ms Livni to handle peace talks, which has raised questions about what she can hope to accomplish.