Stephen Farrell, Middle East Editor of The Times, looks ahead to challenges facing Kadima after its historic, but incomplete, victory in the Israeli elections:

"Kadima was hoping to get ten seats more than it did, so although a natural coalition presents itself, it will be more complicated than Mr Olmert would have wanted. With Kadima on 28, Labour on 20, the left-wing Meretz on 4 and the newly-formed Pensioners' Party on 7, Kadima is still two short of the 61 seats it needs for a majority in the Knesset.

"The likely result is that Mr Olmert will have to reach out to a religious party, probably the ultra-orthodox Shas, who won 13 seats, and make a coalition that wider and more unwieldly than he would have hoped.

"That will make the sharing-out of ministerial jobs more complicated and Kadima will have to tailor the budget to take account of Labour's inevitable demands to boost spending for Israel's poor and the Shas' insistence on support for religious schools and synagogues.

"The good performances of Labour and the Pensioners' Party, which did much better than expected, showed that the voters took Israel's social problems into consideration and did not just focus on relations with the Palestinians, the central theme of Mr Olmert's election campaign. It was noticeable that he acknowledged that in his victory speech.

"As for the Right, although Avigdor Lieberman's Yisrael Beiteinu won a surprising 12 seats, Likud, led by Binyamin Netanyahu, fell to fifth place in the elections. The result is that the hardliners are a rump, accounting for just 32 seats in the Knesset, far short of a blocking majority. It's just possible that one of the parties could be brought into the coalition but it will not have the strength to bring it down.

"The results brought identical headlines in Israel's two best-selling daily newspapers. Both chose "Big Bang" to hail the eclipse of the established parties in the Knesset by Kadima, just four months old, and the newly created Pensioners' Party and Mr Lieberman's party.

"The constrained circumstances of Kadima's victory will have consequences for Mr Olmert's plan to unilaterally set Israel's borders. It was telling last night that he ignored Hamas and the new Palestinian government, which Israel refuses to recognise, but specifically reached out to Mahmoud Abbas, the Palestinian President, and indicated that he might be ready to have talks, something which he had rejected before.

"Mr Abbas's reaction was to tell him to dump his unilateral plan and negotiate. Labour, Mr Olmert's main partner in government, will also put pressure on him to have talks so it looks like he's going to at least have to make noises about doing that."

Times Recommends

• Times Charity Appeal: SolarAid
• Is it Black Monday all over again for Dubai?
• Behind the scenes at the biggest deal