Likud, Nat'l Union Finalize Deal; Sharon to Head 68-seat Coalition

Sides agree that Palestinian statehood issue will be brought before cabinet before any substantive political negotiations.

Prime Minister Ariel Sharon's putative coalition grew from the 61 Knesset seats of Likud, Shinui and the National Religious Party to 68 after the National Union's seven MKs joined the coalition late Tuesday night on a promise that any substantive political negotiations with the Palestinians would be preceded by a government decision.

The agreement between the Likud coalition team and the National Union was finalized late Tuesday night, and will be signed Wednesday morning.

The government guidelines include a reference to Sharon's "Herzliya speech,", in which he outlined support for a political process based on President George Bush's June 24, 2001 speech on the Middle East, which included a reference to an end to the occupation and a two-state solution.

But like the NRP, the National union sent a letter to Sharon expressing its opposition to a Palestinian state. Under the agreement, MK Avigdor Lieberman will get the Transport Ministry, and MK Benny Elon will return to Tourism. In addition, the three-party right-wing bloc that supports "transfer" will get a deputy minister and the chair of the Knesset Interior Committee for three years, as well as a representative on the committee that appoints judges and justices.

The government's guidelines are similar to the outgoing government's, but new elements include the NRP-Likud understandings on religion, Sharon's commitment to the Herzliya speech, an agreement to raise the electoral threshold to 2 percent, a promise to advance the Basic Law, a cost-saving unification of local authorities, and an extension of the emergency regulations prohibiting legislation that costs more than NIS 5 million, unless at least 55 MKs support the bill.

The Likud is expected to have 12 or 13 ministers in the government, in addition to the prime minister and two deputy ministers. For the first time, the Likud will also have the chair of the Knesset Finance Committee. In addition it will have the chair of the Knesset Foreign Affairs and Defense committee, and the Constitution, Justice and Law Committee.

Three or four ministers without portfolio will be appointed, including Natan Sharansky, the former Yisrael B'Aliyah leader who took his party into the Likud when the party's representation in the Knesset was halved to three MKs in the recent election. He will be responsible for Diaspora relations.

Responsibility for the Israel Broadcasting Authority will also remain in Likud hands, most likely one of the ministers without portfolio.

No peace with ShalomMeanwhile, there are rising tensions within the 40-seat Likud faction over the treasury portfolio. Sharon is believed to favor former Jerusalem mayor Ehud Olmert to head the treasury, sparking resentment among supporters of current Finance Minister Silvan Shalom.

Sharon is reportedly seeking to work out an arrangement for Shalom to stay in the government, with a less senior ministerial appointment. But it appears unlikely that Shalom would accept anything less than the treasury post.

The prime minister's life is about to change, Army Radio quoted an aide to Shalom as saying overnight. As great as the blow to Silvan will be, so will be the dimensions of Silvan's revenge. Shalom's associates are also expected to play the "ethnic card" - pointing to the lack of Sephardim in the new cabinet. If Shalom is passed over, Defense Minister Shaul Mofaz is likely to be the Likud's sole Sephardi cabinet minister.