Israeli parties break logjam on government

Israel's two main political parties yesterday resolved their differences enough to form a broad-based government. Last week's decision by Israel's main ally, the United States, to begin talking to Israel's main enemy, the Palestine Liberation Organization (PLO), spurred the two parties to come to terms, Prime Minister Yitzhak Shamir said.

Following weeks of intense, sometimes bitter bargaining, leaders of Mr. Shamir's Likud Party made two key concessions: They gave the center-left Labor Party control of the powerful Finance Committee in the Knesset (Israel's parliament), and it scaled back the number of Jewish settlements to be built in the occupied West Bank and Gaza Strip.

The agreement now goes to the central committees of both parties, where approval is considered probable but not guaranteed. Last month, for instance, the Labor Party Central Committee voted to block coalition talks with Likud. (It reversed that decision days later.) Meanwhile, three Likud Knesset members, opposed to the pact, said last night that they have persuaded more than a third of the Likud Central Committee to back a motion calling for a secret ballot on the coalition agreement.

Two of Israel's small, ultra-Orthodox religious parties, Shas and Agudat Israel, last night voiced anger and disappointment over the announcement and accused Likud of breaking promises made in earlier coalition negotiations. The National Religious Party also voiced concern over the pact, Israel Radio reported.

The announcement came after all-day talks between leaders of the two parties. It culminates a weeks-long game of political brinkmanship between Shamir and Labor leader Shimon Peres, which began after national elections Nov. 1.

The key impasse was resolved when Shamir agreed that Labor will control both the Finance Ministry and the Knesset Finance Committee.

Mr. Peres will be finance minister, but Shamir will appoint the Finance Committee chairman. The committee, which approves the national budget, is considered the most powerful in the Knesset. It will give Labor control over the country's finances and will also enable Peres, indirectly, to protect several key, Labor-backed concerns, including the Histadrut trade unions.

Likud also yielded to Labor's demands and agreed to renege on promises made to right-wing parties to build up to 40 new settlements. Under last night's agreement, up to eight settlements will be established during the first year of the coalition. Additional ones would have to be approved by the Finance Ministry. Peres has opposed new settlements as obstacles to a Middle East peace agreement.

The decision to go into another coalition with Likud was resisted by Labor Party doves. They argued that the party could operate more effectively and without compromising its principles, by going into opposition in the Knesset.

Following Wednesday's decision by the US to open a dialogue with the PLO, party liberals also urged Peres not to enter any coalition that would rule out Israeli talks with the PLO, an action that Shamir has adamantly opposed.

It was the influence of the dovish wing of the Labor Party that almost convinced Shamir that he should proceed to form a narrow government composed of Likud and the small, ultra-nationalist and ultra-Orthodox religious parties.

In the end, the prime minister is said to have concluded that governing with a small, extremist coalition would be too precarious, inviting constant Cabinet crises. Shamir was also aware that only a coalition of the two main parties would enable Israel to resist growing worldwide pressures to negotiate with the PLO on the future of the occupied territories.

Forming a narrow government would also have required Shamir to live up to promises to amend Israel's controversial ``Who-is-a-Jew'' law, which has been hotly opposed by Jews living abroad.

Likud Party sources say Shamir was ultimately convinced that the law, which would recognize as legitimate only Orthodox religious conversions, would cost the backing of American Jews which is critically needed as Israel plots its next moves in response to the recent diplomatic successes of PLO chairman Yasser Arafat.