A coalition could see prime minister Benjamin Netanyahu losing his leadership after a total of 13 years.
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A national unity government has been called for in Israel after exit polls provided no clear winner in the country’s second general election of 2019.
Leading politician Avigdor Lieberman has put himself forward as a kingmaker by making the call for current prime minister Benjamin Netanyahu’s Likud party to join with the Blue and White party and his own Israel Beitenu party to form a government.
“We have only one option – a national, liberal, broad government comprising Israel Beitenu, Likud and Blue and White,” he told a campaign rally in Jerusalem.
Retired military chief Benny Gantz leads the centrist Blue and White party, which had 34 seats, while Mr Netanyahu’s far-right Likud had 33, according to the exit poll by Israeli TV Channel 12.
Speaking a few hours after the exit polls came out, Mr Netanyahu said he will seek to form a new “Zionist” government that excludes Arab parties.
He said he would wait for official results before making conclusions as exit polls are often unreliable.
“There will not be and there cannot be a government that leans on Arab, anti-Zionist parties,” he told a small crowd of supporters at 3.30am on Wednesday.
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Although Likud and Blue and White are Israel’s largest parties, neither appears to be able to form a majority coalition without the support of Mr Lieberman.
He resigned as Mr Netanyahu’s defence minister at the end of 2018 as he believed the prime minister had been too soft during a ceasefire agreement with the Palestinian militant group Hamas.
His resignation prompted the prime minister’s decision to call an early general election in April this year.
Six weeks after that, Mr Liberman’s refusal to compromise with ultra-Orthodox Jewish parties prevented Mr Netanyahu from forming the hard-right coalition he had wanted, pushing Israel into another election.
It remains to be seen whether Mr Gantz will agree to a coalition with Likud, having previously said he will refuse because of the corruption scandals engulfing the prime minister which include fraud, breach of trust and bribery allegations.
He has denied any wrongdoing.
Mr Netanyahu is Israel’s longest-serving leader, having served from June 1996 until July 1999 and from March 2009 until now.
This election will decide whether he can remain in power despite corruption allegations.
Mr Netanyahu is positioning himself as a statesman who is in a unique position to guide Israel through a challenging time, but Mr Gantz is trying to paint his rival as scandal-plagued and divisive.
He has taken a hard line during the campaign, controversially pledging to extend Israeli sovereignty over parts of the West Bank, and to annex all the Jewish settlements in the area, despite the diplomatic repercussions.
If Likud and the Blue and White party do not agree to form a coalition with Mr Lieberman’s party, it could mean weeks of wrangling over a possible unity government.
The exit poll is even closer than April’s result, when Likud took 38 seats in the Knesset, Israel’s parliament, and the Blue and White party took 35.
The Knesset is made up of 120 seats, and with most laws only requiring a simple majority to pass, parties need 61 seats to take control.
Because Israel uses a proportional representation model it has always been governed by coalitions, so the larger parties depend on smaller parties to form what is usually either a right-wing or left-wing governing partnership.
The country’s president, Reuven Rivlin, is responsible for choosing who he believes will be the best candidate for prime minister – not always the leader of the largest party.
Whoever he chooses will then have six weeks to form a working coalition to govern with.