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Prime Minister Benjamin Netanyahu and opposition head Shaul Mofaz surprised the Israeli public and the political establishment early Tuesday morning by announcing that Mofaz' Kadima party had joined the coalition in a national unity government.

The move came as the Knesset was preparing to disperse for an early election, set for September 4.

Under the new coalition agreement, its members undertook to pass a universal service law by the end of July, to amend the system of government by the end of this year, to renew the peace process, to increase personal security and to guarantee a more equitable division of national resources. The agreement does not go into the specifics of each issue, with the exception of the two dates cited, such as budget allocations or guidelines for changing the Haredi draft or the system of government.

Mofaz will be appointed vice prime minister, acting as premier when Netanyahu is abroad. He will join the security cabinet and attend all limited ministerial forums that include the prime minister and deal with military, economic, social and foreign-policy issues. Kadima also agreed to supporting the government's policies until the next scheduled election, in November 2013.

Kadima will assume the chairmanships of the Knesset Economics Committee, the Knesset Foreign Affairs and Defense Committee and a third committee to be named later. Former Shin Bet security service chief Avi Dichter, a Mofaz confidant, is considered likely to be named to head the Knesset Foreign Affairs and Defense Committee.

The formal announcement was made at a joint press conference Tuesday afternoon. "I realized it was possible to restore stability to the government without a new election," Netanyahu said about his decision to form a broad unity government.

"I was told I wanted an election in order to escape the budget, the Tal Law [governing Haredi conscription] and the toughest questions facing Israel," he said, adding, "And now we are here saying we are joining hands. We have a historic opportunity."

Speaking after Netanyahu, Mofaz said, "We decided to take a major historic step. There is neither extortion nor mere gestures here. I did not demand any post ... Kadima will carry out steps we did not manage to do in the past."

Regarding his previous characterization of Netanyahu as a liar, Mofaz said: "We have put that behind us, we are looking to the future."

Late-night drama

The agreement was preceded by a late-night drama in the Knesset. Shortly before 1 A.M. Tuesday a Knesset security guard noticed two men leaving the compound. "Mofaz is about to join Netanyahu's government," the guard whispered to someone, setting off the Knesset rumor mill. The sleepy Knesset cafeteria began to buzz. Bleary-eyed MKs and cabinet ministers, who had readied for an all-night session over the Knesset's dissolution, began hunting for scraps of information about the rumored agreement with Kadima.

Deputy Minister Gila Gamliel (Likud ) called across the cafeteria to MK Yoel Hasson (Kadima ), saying, "Thanks for getting us another year and a half in power."

Hasson, one of a handful of Knesset members who had just been briefed on the development, smiled.

MK Eitan Cabel (Labor ), who is running for chairmanship of the Histadrut labor federation, approached a table of Kadima MKs. "You'd even clean tables in the Prime Minister's Bureau," Cabel said sarcastically.

A short time before, Mofaz had been sitting in the Knesset plenum. His face gave no indication of the roiling drama. Most of his party's MKs were also unaware of the deal that was being hammered out. When the rumors began circulating, Education Minister Gideon Sa'ar and Environmental Protection Minister Gilad Erdan, both of whom are from Likud and were out of the loop, stood in the middle of the cafeteria, furiously calling on their cellphones in an attempt to find out exactly what Mofaz had been given. Was the eviction of Beit El's Ulpana neighborhood imminent? A change to the system of government?

"The move clearly gives Netanyahu and [Defense Minister Ehud] Barak a safety net to launch a strike on Iran," said one opposition MK after hearing about the unity government that was in the works.

MK Yariv Levin (Likud ), who was trying to bring a session of the Knesset House Committee on the vote to disperse the Knesset to a close, stood, visibly shocked. "What a night. I can't remember a drama like this happening before," he said to his fellow MKs. Levin received a succession of notes from party leaders, urging him to keep the meeting going to provide cover for the Netanyahu-Mofaz parley.

Coalition chairman MK Zeev Elkin stood not far from the committee room, tying the final loose ends of the agreement in phone calls to Netanyahu and Mofaz, both of whom confide in him.

Finally, the signal: Likud, Kadima and Labor MKs were summoned to the caucus room at 2 A.M. Netanyahu, smiling arrogantly, passed by the large knot of journalists waiting to ambush him without giving a response. "Why don't you all go to sleep?" he said before slipping into the conference room. He was quickly followed by his former chief of staff, Natan Eshel, who was recently forced out after being accused of harassing a female employee in the Prime Minister's Office. Eshel, one of the godfathers of the agreement, refused to speak with reporters.

MK Miri Regev (Likud ), who followed closely after them, cried out: "Unbelievable, we're rebuilding Kadima."

A little while later, after the agreement was announced, Sa'ar left the room and ran into MK Menachem Eliezer Moses (United Torah Judaism ). "Rabbi Moses, you can continue to work with me indefinitely," Sa'ar told him before embracing him warmly.

"Maybe we won't get a peace agreement with the Palestinians out of this, but Netanyahu will bring a change to the system of government and pass the new Tal Law, these are very important accomplishments," another cabinet member said.