Today, Israel President Shimon Peres has selected Likud leader Benjamin Netanyahu to form the government of the 18th Knesset.   65 Members of Knesset informed the President of their preference of Netanyahu to head the government.
President Peres was persuaded by two factors to choose Likud over Kadima.  The Yisrael Beiteinu (Israel Our Home) supports Likud in its attempt to form a government.  Kadima Leader Tzipi Livni would not join in a unity government with Likud that the Israel President was attempting to broker between the three largest parties.
—Tzipi Livnivia JPost.comKadima had won a plurality of the seats (28) in Knesset, the Israel parliament, in the February 10th election beating out the right-wing Likud Party by one seat.  Livini met with Beiteinu party leader Avigdor Lieberman in an attempt to form the core of an new coalition government.  Kadima was expecting to be able to form a government with Labor (13 seats), Meretz and New Movement (3 seats) and Beiteinu (15 seats).  This coalition would have 59 seats, but now without Beiteinu only 44 seats making either combination 2 seats or 17 seats short of a majority.
Beiteinu won 15 seats in the election — the third most seats — making it key to the make up of the government.  It ran on a plank of loyalty oaths to Israel from Israel's Arab citizens or have their citizens lost.  The initial government coalition of Likud and Beiteinu combined has 44 seats just 19 seats short of a majority.
After official results are published (on February 18, in this election), the President of Israel delegates the task of forming a government to the member of Knesset with the best chance of assembling a majority coalition (usually the leader of the largest party.) That designee has up to 42 days to negotiate with the different parties, and then present his government to the Knesset for a vote of confidence. Once the government is approved (by a vote of at least 61 members), the coalition leader becomes Prime Minister.
—Benjamin Netanyahuvia JPost.comNetanyahu will reach out to Kadima first after the announcement of his selection as possible Prime Minister.  He will extend several key cabinet position to Kadima.  Also, he will be contacting the Labor Party as a possible coalition partner.  During the election campaign, Netanyahu stated that not forming a national-unity government when we was previously Prime Minister was a mistake.
According to Netanyahu's associates, they expect that it is likely that neither Kadima nor Labor will join a Lukid led coalition government.   A right-wing government of 65 seats with Shas (11 seats) as the third party is expected.
Peres consulted with 10 of 12 parties with seats in Knesset. Parties with the total of 65 seats recommend Netanyahu to lead the next government.  Besides Likud and Beiteinu, Habayit Hayehudi, Shas, National Union and United Torah Judaism indicated a preference for Netanyahu.  Other parties (Meretz, Balad, Labor, Hadash and the United Arab List-Ta'al) made no suggestion.
Labor chairman and Defense Minister Ehud Barak indicated Thursday that the Labor is preparing to operating as part of the opposition to the government.  He also indicated that Tzipi Livni was not recommended to the President due to the deal that she offered to Our Home.
The choice of Netanyahu has not encouraged Palestinian officials.  Netanyahu has been on the record as saying that he supports settlement expansion and believes that negotiations with Palestine are a waste of time.  Palestinian president Mahmoud Abbas has said that there will be no negotiation as long as settlement expansion continues.  Furthermore the coalition between Likud and Avigdor Lieberman's party would be a huge blow to the Palestinian's mainly because of Lieberman's refusal to negotiate the question of whether or not to divide the city of Jerusalem, a city which Palestinians have hoped to make their capital for a Palestinian state.  

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Israeli President chooses Likud leader to form the 18th Knesset government