After going to sleep with expectations of September elections, Israelis woke up to a new political reality Tuesday morning, learning that overnight, Prime Minister Benjamin Netanyahu and Kadima chairman Shaul Mofaz signed a deal to form a unity government, leading to a cancellation of early elections.

“A wide national unity government is good for Israel’s security, economy and people,” said Netanyahu about the move.

Shortly after 2:30 a.m., Netanyahu and Mofaz arrived at the Knesset to brief their parties of the details of their secret agreement. Kadima joined the government in exchange for Mofaz’s appointment as a deputy prime minister, a minister without portfolio, and a cabinet member. No other Kadima members will join the government. The new coalition will be one of the largest in Israel’s history, numbering 94 MKs.

Netanyahu and Mofaz speak at a committee meeting in the Knesset in January (photo credit: Miriam Alster/Flash90)

Netanyahu and Mofaz speak at a committee meeting in the Knesset in January (photo credit: Miriam Alster/Flash90)

The two leaders were preparing to hold a joint press conference, announcing the deal and its implications, at noon. But problems with microphones delayed its start.

The agreement will be brought to the Knesset’s approval on Tuesday and is expected to be passed within 48 hours, after which Mofaz will pledge allegiance to the government.

As part of the deal, which was negotiated in complete secrecy over the last week, Netanyahu agreed to back Mofaz’s proposed legislation to replace the Tal Law on national service for the ultra-Orthodox, which is set to expire in August. The new coalition will also legislate electoral reform, and the budget will be passed smoothly, the two agreed. Mofaz said that in the coming year Kadima will receive additional ministerial positions. Both parties have agreed that the 18th Knesset will complete its term and elections will be held on schedule in late 2013.

Mofaz hailed the agreement as “an unprecedented deal” which will permit electoral improvements and equal division of national service burdens.

The appointment of Mofaz, a former military chief and defense minister, is significant in Israel’s standoff with Iran, as he has been a vocal critic of Israel striking Iran’s nuclear sites on its own.

The call for early elections had renewed speculation that Israel might attack Iran’s suspect nuclear program, perhaps within months.

The meeting between Netanyahu and Mofaz took place simultaneously with Knesset deliberations to dissolve the government on Monday evening. Defense Minister Ehud Barak played a role in orchestrating the Netanyahu-Mofaz agreement, Ynet News reported.

The Likud and Kadima factions approved the partnership. Coalition partners Eli Yishai (Shas) and Avigdor Liberman (Yisrael Beytenu) also expressed support for the deal. Yishai said he was party to the plan from the start.

President Shimon Peres lauded the formation of a national unity government as “good for the people of Israel and welfare of the state.”

Knesset Speaker Reuven Rivlin, a veteran of Israeli politics, said he had never seen such a last-minute political upheaval. “This is good for Israel because it brings stability,” he said on Army Radio as he left parliament before sunrise. In a later interview, he said he began suspecting that something was taking place when he saw that Netanyahu, Mofaz and Barak didn’t appear for the first reading of the Knesset dissolution bill.

“I had my suspicions, but I dismissed them, telling myself it was fatigue playing tricks on me,” said Rivlin.

Ex-Kadima head Tzipi Livni, who in the past rejected offers to form a unity government under far more generous terms, posted a short message on her Facebook page Tuesday morning. ”I know what sort of feelings are flooding you after the night’s proceedings, but remember that there is a different kind of politics and it will prevail,” wrote Livni.

With the formation of a national unity government, Labor chairwoman Shelly Yachimovich will likely assume the mantle of leader of the opposition.

Yachimovich denounced the deal as “an alliance of cowards and the most ridiculous and ludicrous zigzag in Israeli political history.”

Meretz chairwoman Zahava Gal-On called the formation of the national unity government “an odious act” and said that Netanyahu and Mofaz had sent a disgraceful message to the public.

Ex-TV anchor Yair Lapid, who must now wait until November 2013 to enter the political fray, scorned the deal as “old politics, corrupt and ugly… politics of seats instead of principles, of jobs instead of the public good, the group’s interests instead of the entire country. This disgusting political alliance will bury all of its members beneath itself.”

Hadash MK Dov Hanin said the new unity government was established  to approve an Israeli strike on Iran and warned that the political deal would lead to a regional war.

Arab MK Ahmed Tibi mocked Mofaz, saying he broke the world record for shortest stint as opposition chairman. He said that with the deal, Kadima had turned into a Likud subsidiary.

Criticism of the move was also voiced by hawkish coalition members. MK Danny Danon (Likud) said accepting Kadima into the government was a departure from the party’s right-wing principles.

The Knesset voting screen showing near unanimous support for the dissolution of the knesset before the deal was made public late Monday night. (photo credit: Noam Moskowitz/Flash90)

The Knesset voting screen showing near unanimous support for the dissolution of the Knesset before the deal was made public late Monday night. (photo credit: Noam Moskowitz/Flash90)

The sensational move was disclosed shortly after the government’s bill to dissolve the Knesset had passed its first reading Monday night by 109 votes to 1, with Kadima supporting it. Parliament was then proceeding toward the second and third readings of the bill, en route to general elections on September 4.

“Moments before the dissolution of the Knesset, [there was] a hasty meeting to establish a national unity government,” Likud MK Carmel Shama Cohen wrote on his Facebook wall.

Initial reports indicated that Netanyahu and Mofaz identified a common interest in staving off early elections and forging a new unity partnership: It would reduce the prime minister’s dependence on the smaller factions that have been pressuring him, and it would give Mofaz a chance to try to build up Kadima’s public standing. In recent polls, it has been heading for only about a dozen seats if elections were held in the near future.

Netanyahu’s Likud, with 27 seats, and Kadima, with 28, are the two largest parties in the current Knesset. Netanyahu and Kadima’s previous leader, Tzipi Livni, discussed a unity government after the 2009 elections, but could not agree on terms, and did not get on well personally. The Netanyahu-Mofaz relationship, though not without friction, is rather better, observers say.

For Netanyahu and Mofaz, a unity partnership with Kadima that staves off elections also potentially weakens a resurgent Labor party — or at least prevents it from boosting its Knesset presence in the near future — and might take some of the wind out of the sails of neophyte Yesh Atid party leader Lapid, who was polling at about 12 seats. While some Kadima MKs might object to the fact that only Mofaz will receive a position, they can breathe easier now that their Knesset seats are no longer threatened by national elections.

Mofaz, who just last month became the head of the opposition, had pledged not to join the government.

“I intend to replace Netanyahu,” Mofaz had told The New York Times after his resounding victory over Tzipi Livni. “I will not join his government.”

According to Army Radio, the deal was deliberated in secret last week, while Netanyahu was mourning the death of his father. Only a handful of people were privy to the proceedings, said to be spearheaded by former senior Netanyahu aide Natan Eshel.

Coalition chairman Zev Elkin, the sole Likud MK to be party to the deal, said there were several preliminary, secret meetings to discuss the agreement but the final decision was made only at the 11th hour.

“I think [former Kadima leader Tzipi] Livni made a mistake by not joining the coalition. Mofaz made a difficult decision, but he took this idea and went with it… the negotiations were not at the expense of the other coalition members.”

“I think Lapid is the biggest loser from all this, and Yachimovich — I think she planned for something else.”