Discontent Over Living Standards
Israel remains one of the most stable countries in the Middle East, despite an extremely diverse society marked with cultural and political differences between secular and ultra-Orthodox Jews, Jews of Middle Eastern and European descent, and the split between the Jewish majority and the Arab Palestinian minority. Israel's fragmented political scene invariably produces large coalition governments but there is a deep-rooted commitment to the rules of the parliamentary democracy.
Politics is never dull in Israel, and there have been important shifts in the country's direction. Over the past two decades, Israel has moved away from the economic model built by the left-leaning founders of the state, toward more liberal policies with a greater role for the private sector. The economy prospered as a result, but the gap between highest and lowest incomes widened, and life has become tougher for many at the lower rungs.
Young Israelis find it increasingly difficult to secure stable employment and affordable housing, while the prices of basic goods keep rising. A wave of mass protest erupted in 2011, when hundreds of thousands of Israelis of different backgrounds demanded more social justice and jobs. There is a strong sense of uncertainty over the future and a lot of resentment against the political class as a whole.
At the same time there has been a notable political shift to the right. Disenchanted with the left-wing parties, many Israelis turned to populist right-wing politicians, while attitudes toward the peace process with the Palestinians hardened.01of 03
Netanyahu Starts New TermUriel Sinai/Stringer/Getty Images News/Getty Images
As widely expected, Prime Minister Benjamin Netanyahu came out on top of the early parliamentary elections held on January 22. However, Netanyahu's traditional allies in the religious right-wing camp lost ground. By contrast, the center-left parties backed by swing secular voters fared surprisingly well.
The new cabinet unveiled in March left out the parties representing Orthodox Jewish voters, which were forced into the opposition for the first time in years. In their place come former TV journalist Yair Lapid, leader of the centrist Yesh Atid party, and the new face on the secular nationalist right, Naftali Bennett, head of Jewish Home party.
Netanyahu faces tough times rallying his diverse cabinet to back controversial budget cuts, extremely unpopular with ordinary Israelis struggling to keep up with rising prices. The presence of the newcomer Lapid will lessen the government's appetite for any military adventures against Iran. As for the Palestinians, the chances for a meaningful breakthrough in new negotiations remain as low as ever.
Israel's Regional SecurityBenjamin Netanyahu, Prime Minister of Israel, draws a red line on a graphic of a bomb while discussing Iran during an address to the United Nations General Assembly on September 27, 2012 in New York City. Mario Tama/Getty Images
Israel's regional comfort zone shrank considerably with the outbreak of the “Arab Spring” in early 2011, a series of anti-government uprisings in Arab countries. Regional instability threatens to disrupt the relatively favorable geopolitical balance Israel has enjoyed in recent years. Egypt and Jordan are the only Arab countries that recognize the State of Israel, and Israel's long-time ally in Egypt, former president Hosni Mubarak, has already been swept away and replaced with an Islamist government.
The relations with the rest of the Arab world are either frosty or openly hostile. Israel has few friends elsewhere in the region. The once close strategic relationship with Turkey has disintegrated, and Israeli policy makers fret over Iran's nuclear program and its links to Islamist militants in Lebanon and Gaza. The presence of Al Qaeda-linked groups among the rebels fighting the government troops in the neighboring Syria is the latest item on the security agenda.03of 03
Israeli-Palestinian ConflictDuring the last hour of hostilities, militants launch rockets from Gaza City as an Israeli bomb explodes on the horizon on November 21, 2012 on Israel's border with the Gaza Strip. Christopher Furlong/Getty Images
The future of the peace process looks hopeless, even if the two sides continue to pay lip service to negotiations.
The Palestinians are divided between the secular Fatah movement which controls the West Bank, and the Islamist Hamas in the Gaza Strip. On the other hand, Israeli mistrust toward their Arab neighbors and fear of ascendant Iran rule out any major concessions to the Palestinians, such as the dismantling of Jewish settlements on occupied Palestinian territories in the West Bank or an end to the blockade of Gaza.
Growing Israeli disillusionment over the prospects for a peace agreement with the Palestinians and the wider Arab world promises more Jewish settlements on occupied territories and constant confrontation with Hamas.