The decision by Prime Minister Ariel Sharon to break with the Likud party that he helped to form 30 years ago is the latest expression of a political crisis that is unfolding in Israel.

On November 21, the 77-year-old Sharon called a news conference to announce that he was quitting Likud to form a new party—Kadima (Forward). He said that “Life had become unbearable in the Likud party,” referring to the elements that had opposed his unilateral disengagement from Gaza. “Likud in its present form cannot lead Israel to its national goals,” he continued.

As a result of Sharon’s move, new national elections have been set for March of next year.

Sharon takes with him 14 Likud members of parliament, including Deputy Prime Minister Ehud Olmert, and one Labour Party cabinet minister, Haim Ramon, thereby exceeding the threshold to qualify for a $2 million advance in state election funding. He is expecting further defections from Labour and counting on some delegates from the “free market” liberal Shinui party to join him.

It is a measure of how far official politics in Israel have shifted to the right that commentators routinely refer to this new formation as a “centre” party and Sharon as a “moderate” and “man of peace.”

The former general was the godfather of the settler movement. He bore personal responsibility as minister of defence in 1982 for allowing the massacre of Palestinians by the Lebanese Phalangists in the refugee camps of Sabra and Shatilla in Beirut. He has spearheaded an effort to scuttle the Oslo Agreement to establish a truncated Palestinian state on the West Bank and Gaza, and for the last five years has headed the most militaristic and right-wing governments in Israel’s history.

Sharon has made it absolutely clear that Kadima’s mission is to press on with plans for a unilateral solution to the conflict with the Palestinians in line with his policy of a Greater Israel. He intends to consolidate Israel’s presence within the established Jewish settlement blocs that would remain part of Israel.

The borders of a future Palestinian entity—already largely determined by the Security Wall—would be addressed only when the Palestinian Authority had put an end to militant opposition to Israel. They would leave vast swathes of the West Bank and east Jerusalem permanently annexed to Israel. A final agreement would only mean the removal of a few of the outlying settlements.

His strategic policy advisor Eyal Arad explained in an interview with Guardian correspondent Chris McGreal that Sharon interpreted the US Road Map as meaning an end to talk of “land for peace.” Instead, only a “total end of the terrorist war” would bring the possibility of a “Palestinian national home”—one not based on the 1967 borders but determined by Israel.

Sharon argues that this is the most realistic way of achieving Israel’s national goals. His policy is driven by the need to secure the backing of the Bush administration. While the White House is happy to support his plans for a Greater Israel, it wants an end to open conflict with the Palestinians in order to push through its broader Middle East agenda, which includes not only the subjugation of Iraq, but also the reining in of Iran and Syria, by military means if necessary. A resolution of the Palestinian conflict would make it easier for the Arab regimes allied to the United States to endorse such plans.

Divisions within the Likud coalition

Sharon’s split with Likud had been widely anticipated. He has outraged much of the party’s extreme right-wing base by evacuating the Gaza settlements, a move he said was needed to establish defensible frontiers and preserve the viability of Israel’s Jewish majority in the face of a rapidly growing Palestinian population.

In the eyes of the ultra-right and semi-fascist wing within Likud and the small religious and nationalist parties, the very forces that Sharon has done so much to cultivate, this was an unpardonable crime. This layer, which has coalesced around the former prime minister, and Sharon’s finance minister, Binyamin Netanyahu reflects the interests of the settler movement, whose political power far outweighs its numerical strength. Viewing the surrender of a single settlement as a betrayal of Israel’s holy destiny, they were seeking to replace Sharon with Netanyahu at Likud’s next primary election, due early next year.

Notwithstanding the bitter factional infighting between Sharon and his far-right and ultra-religious coalition partners, they have much in common. Both sides are dedicated to increasing the settlements, annexing the West Bank to Israel, driving a large section of the Palestinian population into neighbouring Jordan, and confining those that remain behind the 8-metre-high concrete Security Wall.

Since Sharon’s “disengagement” from Gaza, the oppression of the Palestinians has continued, and even intensified—with mass destruction in Gaza, political assassinations, the killing of civilians, including children, terrifying sonic booms, and the arrest of more than 400 Hamas candidates in Palestinian Authority elections.

But such is the opposition within the far right to Sharon’s more pragmatic approach that he has received assassination threats.

Netanyahu, who has the backing of neo-conservative forces within the Bush administration, has utilized the settler forces as part of his power struggle with Sharon, making it impossible for Sharon to control his unruly coalition. Sharon was able to remain in power only thanks to the Labour Party, which joined his government in December 2004 under the leadership of Shimon Peres.

This alliance became untenable because it placed Labour in the position of propping up a government that was waging an unremitting economic war on the working class at home, even as it waged war against the Palestinians. Corporation tax is to be cut from 34 percent to 25 percent, and the top rate of income tax from 49 percent to 44 percent by 2010. Along with privatisations, Netanyahu instituted a welfare-to-work programme aimed at getting 145,000 families off welfare. With unemployment officially put at 9 percent, this means forcing people into minimum wage jobs.

The resulting social polarisation has fuelled opposition to Sharon from the religious parties, whose social base includes some of the most impoverished layers, while increasingly isolating the Labour Party from broad sections of Israeli workers.

Sharon’s decision to split from Likud was precipitated by the vote November 9 of Labour members to elect the left-talking head of the Histadrut trade union federation, Amir Peretz, to replace Peres as party leader.

Immediately after winning the leadership race, Peretz announced that he would pull Labour out of the coalition with Likud because of Sharon’s refusal to seek a negotiated peace deal with the Palestinians as well as his swinging cuts in social spending. This left Sharon without a majority in parliament and made inevitable an early general election.

Labour’s new leader

In his leadership bid, Peretz, a 53-year-old of Moroccan extraction, made an appeal to the widespread popular sentiment for peace and social reform. Uri Avnery, the peace activist, and others have greeted Peretz’s election as a revolution and “breakthrough” in Israeli politics.

The Guardian’s Jonathan Freedland welcomed him as someone who would “revitalise the Labour Party,” “re-open the left-right divide,” and “bring a rare optimism to the Middle East.” On the other hand, Peretz’s opponents have called him a dictator, a Napoleon and a hothead, and characterized him as a hardcore socialist and “dove” who will sell out to the Palestinians.

In reality, Peretz does not so much reflect the mounting anger in the working class as it does the desire of a section of the labour bureaucracy to prevent this anger from leading to a political break with Labour and the nationalist ideology of Zionism.

In his capacity as trade union leader, Peretz has sold out numerous strikes to Israel’s bosses. He has acquiesced to successive governments’ right-wing economic policies, protesting noisily without doing anything to oppose them. He famously said, “The most effective strike is the strike that didn’t happen.”

Peretz became a trade union activist at a time when many poor non-European Israelis were deserting Labour for Likud, Shas and the religious parties. A member of Peace Now, he became mayor of his home town, Sederot, near the Gaza Strip, and entered parliament in 1988 as a Labour member of parliament. He became leader of the Histadrut in 1995. In 1999, he quit the Labour Party to form his own breakaway ‘left’ party, One Nation, winning three seats in the general election of that year.

He used this manoeuvre to strengthen his own political authority, rejoining the Labour alliance in the summer of 2004, when it was about to step in to buttress Sharon’s ailing government. Labour’s participation in the Likud coalition enabled Sharon to grab more land for Israeli settlements in the West Bank and place the burden for the cost of the war against the Palestinians and the ensuing economic recession on the Israeli working class.

Peretz encouraged the 20,000 members of his One Nation organization to re-register in the Labour Party, thereby enabling him to win the Labour Party’s national primary. Even so, he won just 42 percent of the vote, with 40 percent voting for Peres and 17 percent for the even more right-wing candidate, Benjamin Ben Eliezer.

Nevertheless, it is some indication of the mounting opposition to the Likud-Labour coalition that opinion polls show Peretz’s victory boosting Labour’s chances of winning an election—with 82 percent of Labour’s traditional voters saying they would consider voting for the party again. Commentators have speculated that poorer Jews from North Africa and the Middle East who had deserted Labour in droves may now vote for someone who hails from a similar background to their own and claims to espouse social reforms. Peretz has described himself as a “social general” who has overturned the political domination of Labour by former military men.

Any confidence in Peretz is misplaced. No sooner had he been elected party leader than he began to back-pedal from his leftist rhetoric. Having opposed Sharon’s “unilateralism” and demanded a return to a negotiated settlement with the Palestinians, he is now insisting that Jerusalem remain the undivided capital of Israel and that Palestinian refugees be denied the right of return to their former homes in Israel.

He has called for an increase in the minimum wage to NIS1,000 ($2,100) per month, an increase in taxes on the rich, and the repeal of some of the recent legislation that has gutted public expenditure and shredded the social safety net. But as someone who enjoys the support of a number of high-tech industrialists, he has made clear that his reform rhetoric is in no way meant to challenge the basic interests of the capitalist ruling elite.

“I don’t intend to damage the free market and competition,” he recently declared. “But I intend that the free market in Israel will be a market that serves people and that the competition will be fair.”

Sharon and Peretz have agreed to hold elections in March, rather than in November, as previously planned. Polls are predicting that Sharon’s new party will defeat both Likud and Labour, taking 32 seats against 27 for Labour and 25 for Netanyahu’s rump Likud. But even if the polls turn out to be correct, with no party winning an overall majority, Sharon will need to find a coalition partner.

If Sharon wins but is unable to do a deal with Likud, the possibility remains of an alliance with Labour under Peretz. Despite claims that the political realignment brings with it a clear left-right divide, Peretz’s “two states” programme scarcely differs from that of Sharon. Peretz too seeks to defend Israel by confining the Palestinians within a ghetto-type formation—he supports the security wall—in the West Bank and Gaza. The two differ only as to the kind of concessions to be made to the Palestinian elite to secure its cooperation in policing the Palestinians on Israel’s behalf.

In relation to social issues, Peretz’s leftist posturing is unlikely to survive beyond the election, as has been demonstrated by past experience with other Labour leaders, such as Yossi Beilin, Amram Mitzna and even Ehud Barak and Yitzhak Rabin.

Despite its obvious crisis, the ruling class can push ahead with its plans as long as the working class remains wedded to the political outlook of Zionism and is thus incapable of making an independent political intervention.

The project of building a state based upon religious exclusivity and the expulsion of the Palestinians has brought decades of conflict and rule by a corrupt militarist clique. Zionism is organically inimical to genuine democracy and social justice, either for the Palestinians or the broad mass of the Israeli working class. All those who seek peace, democracy and social equality must work to unite all the peoples of the region against both the Israeli and Arab bourgeoisie and their imperialist sponsors on a democratic, secular and socialist basis.