Coalition negotiations have begun between the Likud Party of Prime Minister Ariel Sharon and the Labour Party and are expected to continue all this week. They follow Labour’s endorsement of Sharon’s invitation to Shimon Peres, the 80-year-old party head, to join his shaky coalition to pre-empt a major political crisis.

Labour’s latest move signifies its agreement with Sharon’s drive to consolidate Israel’s hold on the West Bank and impose austerity conditions on working people within Israel, as well as on the Palestinian people.

That the so-called party of peace can contemplate joining the minority Likud government at this time demonstrates, firstly, that peace between Israel and the Palestinians can never be achieved on the basis of Zionism, and, secondly, that the Israeli working class is, like working people all over the world, politically disenfranchised.

Labour’s decision comes only days after the International Court of Justice—the United Nation’s highest judicial authority—condemned Israel’s security wall that, when complete, will annex over half of the West Bank to Israel, ruling that the wall contravened the Fourth Geneva Convention. The Court demanded that it be pulled down because it not only disrupted the daily lives of the Palestinians, but was also prejudicial to their right of self-determination.

Sharon invited Labour to join a “unity” government after his three-party bloc fell apart over his Washington-backed plans—presented as a “unilateral disengagement”—to evacuate 7,500 Zionist settlers and military forces from the tiny Gaza Strip that Israel has illegally occupied since the 1967 war. This and his proposal to close down four isolated settlements and evacuate some 400 people in the West Bank were the quid pro quo for the Bush administration’s recognition of the legality of the annexation of Israel’s far-more substantial West Bank settlements.

In reality, Israel’s military encirclement of and economic stranglehold over the territory means that Gaza is little more than a giant concentration camp that Israel’s armed forces can enter any time they wish to. But Sharon’s hard-line allies considered the removal of a single settlement to be a betrayal. A ballot of the Likud last May rejected his plans, reflecting the deep hostility within Israel’s right wing, which now dominates political life, to surrendering even an inch of the occupied territories.

Leading members of Likud, such as Binyamin Netanyahu, the former prime minister and Sharon’s arch rival, demanded that Sharon water down his proposals as the price for their continued support. At the beginning of June, with the help of the courts, Sharon fired two ministers from the far right National Union Party, who were determined that Israel should hang onto Gaza, in order to get cabinet approval for his pullout from Gaza by the autumn of 2005. Even this has only been approved “in principle”. Sharon must return to the cabinet in March 2005 before dismantling a single settlement.

Two ministers from the National Religious Party walked out in disgust, splitting their own party and costing Sharon his majority in the 120-seat Knesset, Israel’s Parliament. Sharon’s hold on power was further undermined when he was forced to sack Yosef Parnitsky, the infrastructure minister from the secular Shinui party, for attempting to frame a colleague, Shinui’s deputy leader and the interior minister, Avraham Poraz.

It is less than two years since the then Labour leader and defence minister, Benyamin Ben-Eliezer, and five other ministers quit Sharon’s National Unity government, in October 2002, in protest at Sharon’s funding of Zionist settlements in the West Bank at the expense of social welfare programmes within Israel.

But Peres’ justification for Labour’s decision to enter talks with Sharon shows that there are no essential differences between the two parties. He said that Labour had to help the “unilateral disengagement process” for the good of the country, if not the party. It was, after all, Labour’s own policy long before Sharon embraced it.

“I will never forgive myself if, because of our hesitations over whether to join the government, the disengagement is not implemented. We must leave Gaza, we must take down the settlements,” he said.

His conditions for joining Sharon, a lifelong friend, were: faster withdrawal from Gaza, direct negotiations with the Palestinians and, it must be assumed, key cabinet positions for Labour, including the post of foreign affairs for himself.

He dismissed his critics at the meeting of 200 senior members of the Labour Party, saying “They say we are being used. What are they using us for? To bring peace? Should we be embarrassed by that?”

Peres knows full well that Israel will maintain an economic and military stranglehold over the Palestinians. A recent report by the World Bank, drawn up at the request of Israel, the Palestinian Authority and the international financial institutions that pump $1billion a year into the Palestinian economy, confirmed that Israel’s plan to withdraw from Gaza would bring few tangible benefits to the Palestinian economy. Indeed, some elements of the plan could even make the already dire situation worse.

“Were it accompanied by the sealing of Gaza’s borders to labour or trade or by terminating supplies of water and electricity to Gaza, disengagement would create worse hardship than is seen today,” the report said. According to the report, pouring an extra half a billion dollars a year into the economy would not reverse the decline in Palestinian income.

Moreover, Peres and the Labour leaders are fully aware that the pullout from Gaza is nothing more than a cover for Israel’s expansionist policies. Only a few weeks ago, Shaul Mofaz, the minister of defence, announced the construction of hundreds of new homes in the occupied West Bank to house the settlers from Gaza.

The fracturing of the political parties

So poisonous are relations within Israel’s political circles that Israel’s foreign minister, Silvan Shalom, said that the Labour Party’s entry into the coalition would crush Likud and other right-wing parties.

At least 12 of Likud’s 38 MPs are believed to oppose any deal with Labour and to be discussing how to remove Sharon as party leader and prime minister. They are circulating a petition among members of the Knesset (MKs) that states, “The Labour Party’s joining will turn the Israeli government into a leftist secular government.”

At the same time as he is making overtures to Labour, Sharon has also approached two small religious parties, Shas and United Torah Judaism, about joining the coalition. The leader of the Shas party, which has 11 seats and is the fourth largest party in the Knesset, and whose social base is the religious Jews from the Middle East and North Africa, agreed. But there are great difficulties in such a move. Both parties are even more right-wing than Likud and are opposed to dismantling a single settlement in Gaza.

Recently, Israeli intelligence forces warned of growing concern for Sharon’s life in the face of increasing support within the far right for violent resistance to his plan to remove settlements. Some rabbis have issued religious rulings justifying the killing of a Jew by another Jew in defence of the settlements.

The inclusion of two more religious parties would also antagonise Sharon’s other coalition partner, the secular Shinui party, the third largest party in the Knesset. Should Shinui ministers quit the coalition, Sharon’s pullout from Gaza would be in jeopardy—something he does not want to risk, for fear of losing the support of the Bush administration in the United States.

Shinui’s Auraham Poraz has called on Labour to oppose the inclusion of any religious parties in the new coalition government. “It does not have to agree, under any circumstances, to including the Haredim [ultra-orthodox], and ultimately the Likud will give in,” he said in a radio interview.

Talks on a new coalition are expected to take weeks. Doubtless, Sharon calculates that by talking to both Labour and the ultra-orthodox, he can pit one against the other and so persuade his right-wing partners to back the withdrawal plan. More importantly, this demonstrates that Israeli politics have moved so far to the right that this war criminal, father of the settler movement and thoroughly corrupt politician, can do business with either the hard line right-wing or the so-called left-wing parties.

United on Greater Israel

The Labour leaders can agree to discuss a coalition with Sharon because they are united on the essential questions of the war on the Palestinians and on the destruction of the social gains of the Israeli working class. When Labour was in power, in either a Labour or a Likud-led coalition, the settlements in the West Bank and Gaza continued to expand. It was the Labour Party that first demanded the building of a 250 kilometre concrete border between Israel and the West Bank, thus turning the West Bank into a virtual prison.

By participating in the 2001-02 Likud coalition, Labour and Peres—who shared the 1994 Nobel Peace Prize for helping to negotiate the Oslo Accords in 1993, establishing the Palestinian Authority—gave a measure of international credibility to the regime as it proceeded to tear up the Oslo agreement. For 20 months, they covered for the government’s acts of brutality and its human rights abuses and war crimes against the Palestinians. Now they hail Sharon as a man of peace.

United on domestic policy

Another of Sharon’s considerations in pulling out of Gaza has been to find a way of reducing the intolerable burden that the suppression of the Palestinians imposes on the Israeli economy. In this, too, Sharon can rely upon Labour’s support.

Since the Palestinian uprising began nearly four years ago, there has been a collapse in tourism and foreign inward investment, with catastrophic implications for workers’ living standards. Unemployment has risen sharply. Not a week goes by without one section of workers taking industrial action in defence of jobs, wages and conditions.

Netanyahu, the finance minister, has, at the behest of his US backers, imposed an austerity budget of privatisation, deregulation, anti-strike legislation and the slashing of benefits, in order to make Israel a more attractive place for transnational corporations to do business.

Whereas Labour nominally opposes some aspects of Netanyahu’s policies, it is in agreement with Likud on the need to open up Israel’s corporatist economy that the Labour Zionists, through the Histadrut (trade union movement) had built, to private profit. They have few differences with Likud over the need to slash what remains of the welfare system, which Labour introduced in an earlier period in order to defuse class tensions and give the state a progressive colouration around which all Jews could unite.

Sharon has declared that he will not even discuss a change in economic policy with Labour, but there is general agreement that the party will secure a few minor budget concessions for the disabled, retirees and single-parent families.

While Sharon’s apparently natural allies are the right-wing parties, they rest upon the most impoverished and religious layers, the Sephardi Jews who came from North Africa and the Middle East, making it more difficult for them to accede to the cuts in welfare upon which their constituency depends. It is these deep social pressures that have played no small part in the fracturing of the right-wing Likud coalition.

That Labour’s social base is the more privileged and secular layer of Ashkenazi Jews, those who came from the West, plays no small part in Sharon’s calculations. He hopes that what remains of their much tarnished “left” reputation—and their antipathy towards the poorer and religious Jews—will enable them to push through the measures that he and his natural allies cannot.

During the most recent cabinet meeting, Poraz attacked opponents of Labour’s inclusion into the coalition by declaring, “There are people in the Likud who have adopted an anti-Ashkenazi approach.” He was responding to Likud officials who said earlier that a government comprised of the Likud, Labour and Shinui would be a “northern government”—referring to the mainly Ashkenazi, secular, leftist and wealthy northern area around Tel Aviv.

Sharon responded by angrily declaring, “This is madness that will burn all of us. I recommend that no one fan these flames... The fact [is] that every time the ethnic genie is pulled out of the bottle it causes Israel damage on the national level.”