Seconds before the deadline passed, a statement from the Prime Minister’s Likud party announced he had returned the mandate to form a new government back to President Reuven Rivlin.
The onus is now on the President to decide which of Israel’s other political leaders he might entrust with the task of trying to form a governing coalition, or whether to pursue a different path to secure a breakthrough.
Lapid is a one-time Finance Minister who entered politics in 2012 after a successful career as a TV news anchor.
But even if Lapid is given the mandate, the key man in coalition negotiations looks set to be Naftali Bennett, a former Defense Minister and leader of the right-wing Yamina party.
Even though his party won only seven seats in the 120-seat Knesset, Bennett finds himself in the extraordinary position of having been offered the Prime Ministership by both Netanyahu and Lapid, both of whom have offered him a rotation arrangement and said he can go first.
Up to now, Bennett has said his preference is for a right-wing administration, but he has not ruled out a unity government straddling a wide array of parties from right to left.
When asked by CNN how quickly such a unity government could be formed if Lapid were given the mandate, one individual close to negotiations said, “As quickly as Bennett wants.”
“There is no reason it could not happen in a week if he decides he is going for it,” the individual added.
Another individual with knowledge of the negotiations told CNN that Bennett needed to allow Netanyahu’s mandate to expire without success in order to show that a right-wing government was not possible.
“He can’t take the blame for that,” the second individual said.
Benny Gantz, Israel’s current Defense Minister, made an appeal to his predecessor Tuesday evening not to hesitate.
“Naftali Bennet, I know that you’re a person of values. I know that Israel is important to you…You must announce today that you are joining a pro-change government and that you support the presidential mandate being granted to MK Yair Lapid…You are a person of values. Don’t let Netanyahu trample you,” Gantz said.
Israel’s Prime Minister had also made a last-minute appeal to Bennett’s values as the mandate’s deadline drew close, posting a clip from the election campaign of the Yamina leader declaring he would not back a government with Yair Lapid, and declaring, “I am a right winger and it [would] contradict my values. And for me, values have weight.”
“Naftali, prove you are still a right-winger,” Netanyahu’s tweet implored.
Israel’s fourth election in under two years, like the previous three, was seen first and foremost as a referendum on Israel’s longest-serving leader.
Netanyahu has been on trial since last May on bribery, fraud and breach of trust charges.
He denies the charges and has used them as a rallying cry for his right-wing base, describing the proceedings as a witch-hunt pursued by liberal elites and the media.
But his campaign was not enough to prevent another deadlocked parliament, which prompted the Israeli leader to attempt to bring together some unlikely bedfellows in his efforts to stay in power.
His hopes were dashed when the extreme-right wing Religious Zionist party refused to be part of any government which had the support of the United Arab List, an Islamist party which had itself broken new ground by making clear it could support a government led by Prime Minister Netanyahu.
With the mandate now back in his hands, the President is set to consult again Wednesday with the parties before deciding on his next move, expected within the next few days.
Instead of giving it to an individual, he could choose to hand the mandate over to parliament, effectively inviting any of the parliamentarians to come back to him as the head of a 61-seat majority.
Until any new government is agreed and sworn into office, Benjamin Netanyahu remains Israel’s Prime Minister.
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