What Happens After Olmert Resigns

What Happens After Olmert Resigns

On September 17 the Kadima party will hold primaries for a new leader. If no candidate receives a plurality of over 40% of the vote, a runoff between the two leading candidates will be held on the 25^th. Soon after the primaries are over, probably within a week, Ehud Olmert will resign as Prime Minister.

According to article19 of Israel’s Basic Law: The Government, the resignation of the Prime Minister is equivalent to the resignation of the entire government. A new government must be formed; if this proves politically impossible, the Knesset is dissolved and new elections must be held. The process whereby this happens can be complex and lengthy.

According to arts. 7 and 8 of the aforementioned Basic Law, President Shimon Peres is required by law, within one week from Olmert’s resignation, to commission another Knesset member to form a government. This will almost certainly be the new head of Kadima, the largest party in the Knesset and Peres’ own party. The new prime ministerial candidate can then take up to 42 days to form a government and obtain a vote of confidence in the Knesset. This entire process can take up to the middle of November, though it may, of course, happen far more quickly.

Should the candidate for Prime Minister be unable to form a government, the President can make one more attempt and choose another candidate to form a government; the new candidate can take up to 28 days. The President however has another option at this point: He can inform the Speaker of the Knesset (MK Dalia Itzik, Kadima) that, in the President’s opinion, there is no real prospect of anyone being able to form a government that will win the confidence of this Knesset (arts. 9, 11). In that case elections will take place within 90 days from the President’s message to the Speaker of the Knesset.

Should the President choose a second candidate, and this candidate fails to form a government, elections are held within 90 days after the attempt to form a government fails.

Conceivably, it may be possible that the President, for partisan or other reasons, is overlooking a candidate who actually can form a government. In that case, after the President informs the Speaker of the Knesset that he will not appoint a second candidate to form a government, or after his second candidate tries and fails to form a government, 61 MKs (an absolute majority of the Knesset) can petition the President to commission Knesset Member X to form a government (art. 10). Such a petition forces the President’s hand; the law requires that Knesset member X be given 14 days to form a government. If the attempt fails, however, elections must be held within 90 days (art.11).

There is one more law regarding the possible dissolution of the Knesset and holding of elections. According to article 36A (amended) of the Basic Law: The Knesset, the Knesset is dissolved, and elections are held within 90 days, if the budget does not pass within three months after the end of the previous fiscal year — i.e. March 31, 2009 (the fiscal year ends December 31).

The negotiations over the formation of a new government after Olmert’s resignation will take place at the start of budget season and essentially will be negotiations over the budget. These negotiations will take place under difficult circumstances. During the past two years the Olmert government has been slowly but steadily eroding “budget discipline.” This week, the government will consider a Treasury proposal to cut NIS 9 billion from the 2009 budget, about 1.5% of GDP and closer to 4% of the total budget, needed in order to keep spending within statutory limits and avoid a large deficit. The problem is sure to become worse by the end of the year since, as with most economies, the economic crisis in the United States is slowing the growth of Israel’s economy and tax revenues, creating an even larger deficit.

Budgetary policy is a matter of sharp contention within the present coalition. The Shas party, in particular, is in favor of relaxing statutory limits on spending and increasing both the deficit and social welfare spending. If its requests are acceded to, it will mean severe setback for the policy of limited expenditure and declining tax rates Israel has implemented since 2003, which led to rapid growth and a sharp rise in job formation. Negotiations to form a new government could break down on the budgetary issue, in which case elections would be held in early 2009. Alternately, a new prime minister could patch together a new coalition, only to have his tenure cut short in March because no agreement on the 2009 budget is reached.

Finally, it should be noted that Olmert’s resignation does not mean he will be leaving the office of Prime Minister right away. That will happen only after a new government is formed, sometime in October or November. If no government is formed and elections take place, that could mean he stays in office till February or even March.