What this means in practice is that we are likely to see Likud Beiteinu get the largest share of seats in the Knesset but with nothing approaching a mandate for action. Rather than smooth sailing for the ruling party, there will be the usual political gridlock and unstable coalition as the smaller parties extort Likud Beiteinu to fund their pet projects as a condition of joining the government. Lieberman is also an unusually polarizing figure, and his presence at the top will make it harder for a party like Labor to even contemplate joining up in a unity government.
There are also some real implications here for the new U.S. administration, whomever the next president might be. The fact that Netanyahu is not going to be in as strong a position as he anticipates means that he will not be able to afford alienating his settler base or risk an insurrection from Moshe Feiglin, Danny Danon, and the more revanchist wing of Likud. Lieberman, himself a settler, takes an extremely hard-line positions on settlements as well, and thus the new Likud Beiteinu is likely to frustrate any desires on the part of the United States for the Israeli government to either freeze settlement building or to make concessions to the Palestinians, who have been immovably intransigent. The formation of Likud Beiteinu might even deal the final fatal blow to the Palestinian Authority, as Lieberman has been waging a months-long campaign to discredit Mahmoud Abbas by calling him a diplomatic terrorist and is unlikely in his newly powerful position to agree to keep on bolstering the PA. This will create all sorts of headaches for the United States and means that any remaining optimism surrounding the peace process is misplaced.
Netanyahu and Lieberman are banking that their new party will be greater than the sum of its parts, but there is an excellent chance that it will actually be the opposite. Should that turn out to be the case, expect to see a continuation of the congestion that has marked Israeli politics and frustrated its diplomacy over the last decade.
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