ISRAEL: The Israeli Prime Minister, Mr Ariel Sharon, yesterday put the finishing touches to his new ruling coalition. It includes two parties who vigorously oppose a Palestinian state and enthusiastically champion settlement expansion, almost certainly ensuring there will be little progress on the diplomatic front in the coming months.
It raises the possibility, though, that Mr Sharon has a two-stage plan: first heal the country's ailing economy, then veer towards the diplomatic track.
Mr Sharon also sent the political establishment into a tailspin yesterday when he downgraded his rival in the Likud party, the Foreign Minister, Mr Benjamin Netanyahu, by asking him to serve as finance minister, and then offered Mr Netanyahu's job to the current Finance Minister, Mr Silvan Shalom.
The move appeared to be an attempt by Mr Sharon to shunt Mr Netanyahu out of the coalition after the former prime minister had said he would only remain in government if he was allowed to continue in the foreign ministry. Having first rejected the offer, Mr Netanyahu was seriously reconsidering last night.
Mr Shalom, who has little diplomatic experience, holds distinctly hawkish views. He has been a vocal proponent of expelling the Palestinian Authority Chairman, Mr Yasser Arafat, from the Occupied Territories.
Mr Sharon's new coalition, which is made up of 68 seats in the 120-seat parliament, includes his centre-right Likud party (40 seats), the National Religious Party (6), which is considered the political patron of the settler movement, as well as the far-right National Union (7), some of whose members support the "transfer" of the Palestinians out of the West Bank and Gaza.
The most moderate party in the coalition is the centrist Shinui, but it plans to focus on domestic issues for now, like curbing the power of the ultra-Orthodox establishment, since it does not believe progress is possible with the Palestinians as long as Mr Arafat is in power.
Asked to decipher Mr Sharon's approach to the conflict with the Palestinians, a close friend of the Prime Minister's, Mr Eli Landau, said yesterday the Israeli leader "will not want to end his career without making peace with the Palestinians". However, he suggested that Mr Sharon was in no hurry.
Any sniff of progress on the Palestinian front is certain to rattle Mr Sharon's coalition.
The policy guidelines of the new government contain a reference to a speech Mr Sharon gave last year in which he declared his support for President Bush's June 24th, 2001, address on the Middle East, which included a call for the end to the occupation and a two-state solution to the conflict.
However, the government guidelines include no reference to a Palestinian state or to the peace roadmap backed by the Quartet mediators - the US, EU, UN and Russia - which calls for a Palestinian state and a freeze on settlement building.
Mr Sharon, having failed to bring the centre-left Labor Party into his government, may have decided to focus on trying to tackle Israel's economic woes before turning to the diplomatic process. Free of sectoral parties, like the ultra-Orthodox, he will probably be able to make deep budget cuts.
Later, once he begins trying to unlock the conflict with the Palestinians, he could discard the far-right parties and try bring Labour into his government.
This approach seems to contradict the widely-held view in Israel that without an end to the warfare in the territories there is little chance of repairing the economy.
It also assumes Mr Sharon plans to go through with his pledge, made before he was elected the first time in early 2001, to make "painful concessions" for peace. So far he has shown no inclination to do this, and has given few hints of what exactly he is prepared to concede.
He has expressed support for a Palestinian state - albeit a highly limited one - but has refused to commit to dismantling any Jewish settlements. A team, set up by him and which will soon complete its work, plans to present the Americans with a list of more than 100 reservations to the peace roadmap.