In Israel, Prime Minister-designate Benjamin Netanyahu is expected to complete forming his new government next week.
It will be dominated by right-wing and ultra-Orthodox religious parties — and ultranationalist leader Avigdor Lieberman has been tapped to become foreign minister.
But Netanyahu has also persuaded the center-left Labor Party to join his government. Some Labor leaders hope their inclusion will influence policy and ease concerns about Netanyahu's commitment to peace with the Arabs.
When Netanyahu presents his government to parliament next week it will mark the culmination of his efforts to return to the office he held in the late 1990s.
Perhaps trying to ease concern in Europe and the U.S. that his incoming government is not interested in resuming peace talks, Netanyahu told an economic conference in Jerusalem this week that he is prepared to negotiate for peace with the Palestinian Authority.
"I think the Palestinians should understand that they have in our government a partner for peace, for security and for rapid economic development of the Palestinian economy," he said.
That statement brought only a lukewarm response from the Palestinian Authority. Netanyahu made no mention of an independent Palestinian state.
Chief Palestinian negotiator Saab Erekat said Netanyahu "has not accepted a two-state solution" to the conflict. And he warned that if Jewish settlements keep expanding in the West Bank, Netanyahu will "not only torpedo the peace process, he will bury it."
Netanyahu has said he will pursue a policy that would offer economic incentives for the West Bank as a foundation for eventually working toward negotiations on core issues. Diplomats, especially in Europe, have warned that that may not be good enough. The European Union's foreign policy chief, Javier Solana, recently said relations would be strained if the incoming government steps back from talks on creating a Palestinian state alongside Israel.
"Let me say very clearly that the way the European Union would relate to a government that is not committed to a two-state solution would be very, very different. And they know it. And we have to keep on saying that," he said.
Joining The Coalition
Netanyahu's refusal to commit to a two-state solution is a key reason Tzipi Livni of the Kadima party, which got the most votes in last month's election, decided against joining a Likud-led coalition.
Netanyahu's deal this week with the Israeli Labor Party includes an agreement to abide by previously signed diplomatic and international agreements and to create a plan for Middle East peace. But, again, there is no mention of a two-state solution with the Palestinians. There was a bitter debate within Labor over whether or not to join the coalition.
"They think that by going inside you can have more impact," says Daniel Ben Simon, a Labor Party member of parliament.
Ben Simon says he was opposed to joining the coalition. But now he says it may be the best thing Labor can do — to try to influence policy from within rather than, as he put it, sit home and cry about the right-wing mood in Israel.
"I mean, two weeks ago it would seem a nightmare to me, such a coalition, I mean Lieberman and Netanyahu. But ... I don't ever remember such a mood among Israelis. Their attitude toward Arabs, their attitudes toward the peace process. What I'm telling you is that this election, this coalition, is the face of Israel 2009," says Simon.
It's not clear how stable and long-lasting the coalition will prove to be. Netanyahu's stand on peace efforts with the Palestinians could spark tensions with the Obama administration, which has made it clear it favors strong diplomacy and dialogue to tackle the Arab-Israeli conflict.