By Luke Baker and Jeffrey Heller Reuters From Yahoo news

JERUSALEM (Reuters) – Israeli Prime Minster Benjamin Netanyahu pledged on Wednesday to form a new governing coalition quickly after an upset election victory that was built on a shift to the right and is likely to worsen a troubled relationship with the White House.

In the final days of campaigning, Netanyahu abandoned a commitment to negotiate a Palestinian state – the basis of more than two decades of Middle East peacemaking – and promised to go on building settlements on occupied land. Such policies defy the core vision of a solution to the Israeli-Palestinian conflict embraced by President Barack Obama and his Republican and Democratic predecessors.

With nearly all votes counted, Netanyahu’s Likud had won 30 seats in the 120-member Knesset, comfortably defeating the center-left Zionist Union opposition on 24 seats. A united list of Israeli Arab parties came third.

The result was a dramatic and unexpected victory for Netanyahu – the last opinion polls four days before the vote had shown Likud trailing the Zionist Union by four seats.

Although Netanyahu must still put together a coalition, his victory all but guarantees that Israel’s president will give him the first opportunity to form a government, putting him course to become the longest-serving leader in the country’s history.

“I am moved by the responsibility Israel has given me and I appreciate the decision by Israel’s citizens to elect me and my friends, against all odds and in the face of powerful forces,” Netanyahu said during a traditional thanksgiving visit to Judaism’s holy Western Wall in Jerusalem.

But the promises he made to ultranationalist voters in the final days of the campaign could have wide consequences, including deepening rifts with the United States and Europe and potentially emboldening Palestinians to take unilateral steps towards statehood in the absence of any prospect of talks.

Saeb Erekat, chief Palestinian negotiator in peace talks that collapsed last year, lamented “the success of a campaign based on settlements, racism, apartheid and the denial of the fundamental rights of the Palestinian people”.

Likud said Netanyahu intended to form a new government within weeks, with negotiations already under way with the far-right pro-settler Jewish Home party led by Naftali Bennett, the centrist Kulanu party and ultra-Orthodox groups.

The critical party to get on side will be Kulanu, led by former Likud member and communications minister Moshe Kahlon, who won 10 seats, making him a kingmaker given his ability to side with either Netanyahu or the center-left opposition.

“The citizens of Israel expect us to quickly put together a leadership that will work for them regarding security, economy and society as we committed to do – and we will do so,” Netanyahu said.

Netanyahu’s deputies were already holding preliminary talks with potential coalition partners, Israeli media said.

President Reuven Rivlin said he would launch consultations with party leaders on Sunday to try and form a new government as soon as possible.

Isaac Herzog, leader of the Zionist Union, conceded defeat and congratulated Netanyahu. Herzog said he would not seek to join a Netanyahu-led government.

The Tel Aviv stock market was largely unmoved by Netanyahu’s victory, with the benchmark Tel Aviv 100 index up marginally at mid-day.

“The market’s indifference to the results apparently stems from its belief that the coalition that will be formed will be more stable than its predecessor,” said Idan Azoulay, chief investment officer at the Epsilon brokerage.

HARD ROAD AHEAD

While Likud is the largest party, the process of forming a coalition could be challenging, with potential political partners certain to raise a variety of demands.

With the backing of right-wing and religious factions, and with Kahlon also on board, Netanyahu could end up with 67 parliamentary seats, a commanding majority.

If Netanyahu follows through on his pledges it would put him on a collision course with the Obama administration and the European Union, which has been weighing steps including trade measures to sanction Israel for its settlements policy.

The White House was already angry with him for addressing the U.S. Congress at the invitation of Republican lawmakers in a bid to scupper U.S. nuclear talks with Iran.

Obama will call Netanyahu to congratulate him on being re-elected in the coming days, the White House said.

White House spokesman Josh Earnest told reporters that the administration would evaluate its approach on the Middle East peace process following Netanyahu’s statement that there would be no Palestinian state under his watch.

During much of the campaign, Netanyahu had focused on security issues and the threat from Iran’s nuclear program, a message that appeared to gain little traction with voters.

The Zionist Union emphasized socio-economic issues, including the high cost of living in Israel, and its message had seemed to be generating much more momentum.

But Netanyahu’s move to the right, playing up fears of the spread of Islamist groups, promising no concessions to the Palestinians and raising alarm about growing support for Arab-Israeli parties, looks to have spurred his base into action.

The White House said it was deeply concerned by the use of “divisive rhetoric” in the election that sought to undermine Arab-Israeli citizens.

For the Palestinians, the results are a deep concern, raising the prospect of more settlement expansion on land they want for their own state in the occupied West Bank and East Jerusalem, as well as in Gaza.

Netanyahu’s victory also raises questions about what happens on Iran, with Obama determined to pursue negotiations towards an agreement on Tehran’s nuclear program and the Israeli leader determined to foil what he has termed a “very bad deal”.

The Palestinians may quickly create problems for Netanyahu as they formally join the International Criminal Court on April 1 and intend to pursue war crimes charges against Israel over its occupation of the West Bank and last year’s war in Gaza.

(Additional reporting by Steve Scheer and Ari Rabinovitch; Editing by Peter Graff and Giles Elgood)

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Related story:

Netanyahu clarifies his chilling vision for post-democratic Israel

By Jonathan Chait From New York Mag

Benjamin Netanyahu’s wild swerve, from right-wing to ultra-right-wing, in the run-up to Israel’s elections is a desperate tactic to reverse the trajectory of his flailing campaign. But it also represents an important marker in his career, and a clarifying moment in the course of the Israeli right.

Netanyahu has generally played a coy game on Palestinian statehood. He has supported the two-state solution in theory but abjured it in practice. His settlement policy has, likely by design, made negotiations impossible, which has seemed to produce his ideal result: Israel holds on to the West Bank and Netanyahu can blame the Palestinians for it. His new line dispenses with the coyness. Netanyahu now opposes yielding territory, full stop. If Netanyahu prevails, the nature of Israel’s diplomatic alliance with the United States will have to change — the U.S. cannot continue to extend its U.N. veto to a country whose government has formally disavowed negotiations.

His comments today are more alarming still. Rallying his supporters to the polls, Netanyahu warns, “Arab voters are going to the polls in droves. Left-wing organizations are bringing them in buses.” Of course, the availability of Arab voting rights is a longtime point of Israeli pride, a fundamental defense of the principle of Zionism against its existential critics.

Taken together, Netanyahu’s comments present a coherent and chilling vision of his long-term strategy. His intention is to maintain singular Israeli control in perpetuity over the entire territory that the early Zionists were once happy to partition into two states. This course will eventually lead to pressure for Palestinians to gain a democratic voice within the institutions that control their lives, but Netanyahu treats that as illegitimate, as well. He proposes to snuff out every peaceful outlet for Arab political aspirations.

In this light, his bumbling attempts to transform Israel’s alliance with the United States into an alliance with its conservative movement looks less like a blunder (as his former ambassador Michael Oren has described it) and more like a plan. In the long run, a deep American alliance with the kind of garrison state Netanyahu envisions will become untenable. The only remaining diplomatic strategy will be to deepen Israel’s ties with right-wing America, whose support for Israel is not contingent upon it fulfilling its liberal, democratic ideals. The Republicans who hailed Netanyahu as a Churchillian prophet are cheering a figure who no longer disguises his intention to bury forever the original Zionist dream

IMAGE: Israeli Prime Minister and Likud party’s candidate running for general elections, Benjamin Netanyahu gives a statement to the press during his visit in Har Homa, an Israeli settlement neighbourhood of annexed east Jerusalem, on March 16, 2015 on the eve of Israels general elections. MENAHEM KAHANA/AFP/Getty Images

For more on this story go to: http://nymag.com/daily/intelligencer/2015/03/netanyahus-vision-for-post-democratic-israel.html?om_rid=AACMTw&om_mid=_BVCH5lB9AA2Cz2