Kadima, the party created by Ariel Sharon just four months ago, is due to form the next Israeli government after winning a narrower-than-expected victory in yesterday's election.
Led by Mr Sharon's successor, Ehud Olmert, Kadima won 28 seats in the 120-seat Knesset last night, after campaigning on a centrist platform of withdrawing settlers from the West Bank and imposing new borders on the Palestinians.
Although formal talks are not due to start until Sunday, Mr Olmert has already begun to cobble together a coalition that will support the re-drawing of Israel's frontiers by 2010 and the evacuation of up to 70,000 Jewish settlers from the occupied territories.
Although the party won fewer than the 34 seats previously predicted, a senior Kadima official said Mr Olmert was confident of the support of 70 members of the Knesset, a comfortable majority.
"I believe we will have more than 70 legislators who will support the disengagement plan," said Haim Ramon, the co-chairman of Kadima's election campaign.
But Shimon Peres, a Nobel Peace laureate who quit the Labor party to join Kadima, said that the margin of victory had left the new party with a challenging future. "I think we can run a government with 28 seats. It will be difficult, but possible," he told Army Radio.
Formal talks, overseen by the Israeli President, Moshe Katsav, will begin next week but early signs indicated that Kadima would seek a centre-left coalition with the Labour party, which won 20 seats, the left-wing Meretz (4), the newly-formed Pensioners’ Party (7) and the ultra-orthodox religious party, Shas (13).
The crowded coalition is likely to impose compromises on Kadima's hitherto clear policy of unilateral withdrawals from the Palestinian Territories and a strengthening of the $2 billion "security fence", which Mr Olmert hopes to convert into a international border.
After an unexpectedly strong showing from Labour and the Pensioners' Party, Mr Olmert will also be under pressure to increase public spending for Israel's welfare programmes and to rein in unpopular free-market reforms.
In his victory speech last night, Mr Olmert suggested that he would be willing to open talks with Mahmoud Abbas, the Palestinian President, despite a continuing refusal on the part of Israel to recognise the territory's new Hamas-led government. Under the Palestinian political framework, however, Hamas does not have a direct role in international peace talks, which are conducted through Mr Abbas's Palestinian Liberation Organisation of which Hamas is not a member.
"In the coming period we will move to set the final borders of the state of Israel, a Jewish state with a Jewish majority. We will try to achieve this in an agreement with the Palestinians. This is our hope and prayer," he said.
Addressing the Palestinian leadership, Mr Olmert said: "We are prepared to compromise, give up parts of our beloved land of Israel, painfully remove Jews who live there, to allow you the conditions to achieve your hopes and to live in a state in peace and quiet.
"I hope to hear a similar pronouncement from the Palestinian Authority. The time has come for the Palestinians and their leaders to relate to the existence of the state of Israel, to accept only part of their dream, to stop terror, to accept democracy and accept compromise and peace with us."
Mr Abbas, attending a meeting of the Arab League in Khartoum, said that meaningful negotiations would only be possible if Mr Olmert abandoned the strategy of unilateral withdrawals devised by his predecessor and mentor, Mr Sharon. "This result will not change anything as long as the agenda of Olmert himself does not change and he does not abandon the question of ’unilateral agreements,'" he said.
The European Union also urged Mr Olmert "to seek a negotiated peace deal with the Palestinians" rather than pursue the policy of creating its own borders deep inside the occupied West Bank.
Javier Solana, the EU’s foreign policy chief, said he had spoken to Mr Olmert earlier today. "I encouraged Mr. Olmert to pursue all efforts to move toward a peaceful, negotiated resolution of the Middle-East conflict," he said. "I assured him that the European Union stands ready, as always, to offer all its support in this process."
In Jerusalem, the victory of Kadima, alongside surprisingly good performances from the Pensioners' Party and Yisrael Beiteinu (Israel, Our Home), a new far-right party that wants to forcibly remove 500,000 Arabs from Israel, was hailed as a "Big Bang" that broke Israel's traditional party lines.
The severest defeat was inflicted on Likud, the traditional party of the Right led by Binyamin Netanyahu, the former Prime Minister and anointed heir to Mr Sharon until last year.
His divided and bickering party was pushed into fifth place and reduced to a right wing parliamentary rump, taking just 11 seats following the defection of many of its most prominent figures to Kadima with Mr Sharon.
"There is no doubt that we have suffered a heavy blow. It is the second time in 100 days that we’ve been left in disarray after the departure of he who led us," said Mr Netanyahu, who claimed throughout the campaign that his message was being misunderstood by the voters and the Israeli press.
Danny Naveh, who served as a Likud Health Minister until January this year, called the result "a great catastrophe". "We will have a great deal of very profound soul-searching within the Likud. I think we'll pretty much have to start all over again," he said.
