Although the Israeli general election produced no clear winner, there was a definite swing to the right by the electorate and gains were made by the right-wing bloc. Surprisingly, the centrist Kadima party led by Foreign Minister Tzipi Livni emerged as the largest party - probably due to Israel's offensive in Gaza - with 28 seats, a decrease of one.

The right-wing Likud party more than doubled its number of seats from 12 to 27, the centre-left Labour party lost six seats to end up with 13 while the far-right Israel Beitenu party increased its seats from 11 to 15.

The election, which was dominated by security issues and the war in Gaza, was called because one of the parties in the outgoing government, the religious Shas party, which got 11 seats in last week's poll, refused to remain in the ruling coalition when Tzipni Livni tried to form a new government after becoming Kadima leader last September.

The new composition of the 120-seat Israeli Parliament makes it virtually impossible for Livni to form a coalition with her natural allies. Kadima and Labour together only have 41 seats and the left-wing Meretz party, which is not part of the outgoing coalition, has three seats. The Gil party, a party of pensioners, which is part of the governing coalition, lost all its seven seats. The three Arab parties together have 11 seats, but never form part of any governing coalition.

The combined strength of the religious parties is 23 seats, enough to form a majority with Kadima and Labour, but this is almost out of the question as these parties are much closer to Likud especially on issues such as Israeli settlements, Jerusalem, the Golan Heights and the establishment of a Palestinian state.

The Israel Beitenu party, led by Avigdor Lieberman, who wants to subject Israeli Arabs to a 'loyalty test' and possibly deprive them of their citizenship, could theoretically join with Kadima and Labour and then only the support of a small party would be needed to form a parliamentary majority, but this is unlikely.

The Israel Beitenu party was actually part of the outgoing coalition between November 2006 and January 2008, when it withdrew its support because it believed the government was too soft while negotiating with the Palestinians.

Lieberman has already made it clear that he believes Israel should have a right-wing nationalist government, which means he is likely to support Likud, although he adds: "We do not rule out anyone".

In any case, Lieberman, whose party is now the third largest in Israel, pushing the once mighty Labour party to fourth place, is likely to play the role of kingmaker in the negotiations on forming a new government.

President Shimon Peres now has the task of calling on a leader who he thinks will be able to command the support of a majority bloc in Parliament. In this task he has two options - he can give this mandate to Livni, whose party is the largest, or to Likud leader Benjamin Nethanyahu, whose party, together with other right-wing parties form a parliamentary majority of 65.

One way out of Israel's political crisis is the formation of a grand coalition between Kadima and Likud and a smaller third party with both Livni and Nethanyahu agreeing to occupy the job of Prime Minister for a period of two years each.

This has happened once before - in the 1980s, Labour's Peres and Likud's Yitzhak Shamir agreed to such a formula when forming their coalition government.

The horse-trading and prolonged negotiations that are likely to take place is certainly not good news for Israel and bad news for the Middle East peace process.

Irrespective of who gets the Prime Minister's job, however, there is no doubt that Israeli public opinion and the political landscape in Israel has swung to the right and is more hostile to making peace with the Palestinians.

Any future Israeli government will therefore almost certainly have to include a major right-wing party such as Likud or Israel Beitenu, which makes the prospects for a settlement with the Palestinians more difficult.

This is worrying especially when one considers that Israel's recent assault on Gaza has increased Palestinian support for Hamas - at the expense of the more moderate and secular Fatah - and for a rejectionist stance towards Israel.

Whoever becomes Prime Minister will have an overwhelming in-tray awaiting him/her. Israel's war with Hamas in Gaza is unresolved, the peace process with the Palestinians is going nowhere, Iran is pressing ahead with its nuclear programme, Syria wants the Golan Heights to be returned, and Hizbollah in Lebanon is still a major threat.

Israel, however, will eventually have to decide if it really wants peace.

The only way forward is an acceptance of the Arab League plan - recently endorsed by US President Barack Obama - which calls for a full Israeli withdrawal from all occupied Arab land and the creation of a Palestinian state as part of a regional peace plan. This is Israel's best - and only - possibility for long-term security.

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