Israeli prime minister-designate Benjamin Netanyahu inked a coalition deal with an ultranationalist party on Monday, in the first step toward forming a right-wing government.
Netanyahu’s Likud signed an agreement with the Yisrael Beitenu party of Avigdor Lieberman, a controversial firebrand labeled a “racist” by critics who is expected to become foreign minister in the new government.
The deal came as prosecutors told the supreme court that police were continuing their inquiries into longstanding graft allegations against the foreign-born ultranationalist amid suspicions he was continuing to break the law, army radio said.
The accord struck by the Likud with Lieberman’s party was careful not to shut the door on the formation of a broader coalition, specifying that if agreement was reached with centrist parties the distribution of portfolios might change.
Netanyahu later on Monday met President Shimon Peres in Jerusalem ask him to encourage the centrist Kadima party and center-left Labor to join a unity government, public radio said.
A narrow right-wing coalition would be likely to put Israel at odds with its main ally the US, where President Barack Obama has vowed to vigorously pursue the peace process with the Palestinians.
Egyptian Foreign Minster Ahmad Abul Gheit expressed concern that Israel’s shift to the right could have dire consequences for such efforts.
“If they would implement what they’ve been talking about over the last few years, we would all of us face dire difficulties and face the most extreme of situations,” he told members of the European Parliament in Brussels.
Israeli party officials said that in addition to the foreign ministry, Yisrael Beitenu would also get internal security, infrastructure, tourism and integration of new immigrants.
The agreement marks the first Netanyahu has reached since being tasked with forming a new government in the wake of a Feb. 10 parliamentary election.
Lieberman, an immigrant from ex-Soviet Moldova, has taken a hard line on Israeli Arabs that has earned him accusations of racism from critics and a reputation as a needed strong hand from supporters.
His lawyers petitioned the supreme court on Monday alleging “harassment” by the authorities over nine-year-old accusations of fraud, abuse of confidence, money-laundering and illegal campaign financing.
There was no immediate ruling from the court but prosecutors insisted that police would continue their inquiries after refraining from summoning Lieberman in recent weeks because of the coalition talks involving his party.
Prosecutors alleged that he had received “very large sums of money from abroad” through front companies, army radio reported.
Ahmed Tibi, a member of parliament with the United Arab List, urged the EU to boycott Lieberman if he becomes foreign minister.
“I urge European foreign ministers not to recognize this fascist who advocates the expulsion of Arabs,” he said.
Lieberman supports keeping Israel’s largest settlement blocs in the occupied West Bank in exchange for transferring heavily Arab populated areas in Israel to Palestinian control.
He also wants Arab Israelis to take a loyalty oath as a condition for receiving government benefits.
Meanwhile, talks between Israel and Hamas in Cairo over a prisoner exchange failed to reach an agreement, Israeli media reports said.
The office of outgoing Israeli Prime Minister Ehud Olmert said late on Monday that the talks collapsed because Hamas was making excessive demands and hardened its stance.
The Israeli envoys, domestic security chief Yuval Diskin and diplomat Ofer Dekel, said Hamas has also backed away from agreements that had already been reached in the talks, the Haaretz newspaper said.
On Monday night, both Diskin and Dekel departed Cairo after two days of indirect negotiations.
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