Ultra-Orthodox Party Emerging as Israel Kingmaker

An ultra-Orthodox Jewish party run by an octogenarian rabbi who has said Hurricane Katrina was divine punishment emerged Thursday as the kingmaker in forming the next Israeli government.

Having won a fight to be leader of the ruling Kadima Party, Tzipi Livni now will likely need Shas as a partner to become prime minister. But Shas opposes any compromise on Jerusalem, and including it in a coalition could tie her hands in peace talks with the Palestinians.

Livni's narrow victory in a party primary Wednesday to replace corruption-tainted Prime Minister Ehud Olmert as Kadima's chairman means she can become prime minister if she can put together a coalition government of her own.

Livni, now the foreign minister, has said she would like to keep the current four-party coalition intact.

Two of Kadima's partners, Labor and the Pensioners, aren't expected to balk. But Shas and its spiritual leader, Rabbi Ovadiah Yosef, are wild cards. The party holds 12 of parliament's 120 seats, enough to make or break the current majority bloc of 67 lawmakers.

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Livni had barely declared victory Thursday morning when Shas laid down its demands.

"If it's clear Jerusalem is on the negotiating table and social-economic needs are not taken into consideration, then we won't be part of the coalition," Shas spokesman Roi Lachmanovitch said.

Shas Cabinet minister Ariel Attias said the party wants more funding from the cash-strapped government for the welfare projects that are popular with its low-income constituents.

Formal coalition negotiations won't begin until Olmert officially resigns and President Shimon Peres assigns Livni the task of forming a new government, which could happen next week.

But Livni said she would begin informal coalition negotiations immediately. In one of her first acts as Kadima leader, she scheduled a meeting with Shas leaders late Thursday. Shas leader Eli Yishai said they discussed setting up a coalition.

If Livni can't keep the coalition intact, elections would likely be called for early next year — some 18 months ahead of schedule. In either case, Olmert will remain as a caretaker leader until a new Cabinet is approved.