The results defied forecasts that Israel's next government would veer sharply to the right at a time when the country faces mounting international isolation, growing economic problems and regional turbulence. While that opens the door to unexpected movement on peace efforts, a coalition joining parties with dramatically divergent views on peacemaking, the economy and the military draft could just as easily be headed for gridlock - and perhaps a short life.
With nearly all votes counted, Netanyahu's hawkish bloc and rival centrists and leftists each commanded 60 of parliament's 120 seats. Netanyahu, who called early elections three months ago expecting easy victory, is likely to be tapped to form the next government because his Likud-Yisrael Beitenu alliance is the largest single bloc in parliament, while his rivals include 12 seats from Arab parties that are traditionally excluded from coalition building.
Netanyahu said the election outcome proved "the Israeli public wants me to continue leading the country" and put together "as broad a coalition as possible" to achieve three major domestic policy goals: bring ultra-Orthodox Jewish men into the military, provide affordable housing and change the system of government, now hostage to a fragmented multiparty system that often gives smaller coalition partners outsize strength.
He later alluded to peacemaking, but only obliquely so, when he added that coalition talks would also focus on "security and diplomatic responsibility." He took no questions from reporters and strode immediately out of the room after delivering his statement.
His remarks seemed to be an overture to political newcomer Yesh Atid, or There is a Future, party, which turned pre-election forecasts on their heads and dealt Netanyahu such a sharp political blow.
Yesh Atid's leader, Yair Lapid, has said he would only join a government committed to sweeping economic changes and an overhaul of the system of government. He also called for a serious effort to resume stalled peace talks with the Palestinians, but his main focus is on economic and social issues.
The results were not official, and the final bloc breakdowns could shift before the central elections committee finishes its tally early Thursday. With the blocs so evenly divided, there remains a remote possibility that Netanyahu would not form the next government, even though both he and Lapid have called for the creation of a broad coalition.
Under Israel's parliamentary system, voters cast ballots for parties, not individual candidates. Because no party throughout Israel's 64-year history has ever won an outright majority of parliamentary seats, the country has always been governed by coalitions. Traditionally, the party that wins the largest number of seats is given the first chance to form a governing alliance. President Shimon Peres has until mid-February to set that process in motion, though he could begin earlier.
Netanyahu's Likud-Yisrael Beitenu alliance polled strongest in Tuesday's election, winning 31 parliamentary seats. But that is still 11 fewer than the 42 it held in the outgoing parliament and below the forecasts of 32 to 37 in recent polls. Yesh Atid had been projected to capture about a dozen seats but won 19, making it the second-largest in the legislature.
The goal of a broad coalition will not be an easy one, however, and will force Netanyahu to make some difficult decisions. In an interview last week with The Associated Press, Lapid said he would not be a "fig leaf" for a hard-line agenda on peacemaking. A leading party member, Yaakov Peri, said Wednesday that Yesh Atid will not join unless the government pledges to begin drafting the ultra-Orthodox into the military, lowers the country's high cost of living and returns to peace talks.
"We have red lines. We won't cross those red lines, even if it will cost us sitting in the opposition," Peri told Channel 2 TV.
That stance could force Netanyahu to promise overtures - perhaps far more sweeping than he imagined - to get peace negotiations moving again. But a harder line taken by traditional and future hawkish allies could present formidable obstacles to coalition building.
Experience also shows that promises made during coalition negotiations do not always pan out. Yesh Atid has not yet spelled out specific conditions it would set down on this issue.
The election results surprised Israelis, given the steady stream of recent opinion polls forecasting a solid hard-line majority and a weaker showing by centrists. Netanyahu may have suffered because of his close ties to the ultra-Orthodox and perhaps from complacency. Many voters chose smaller parties, believing a Netanyahu victory was assured.
Statistician Camil Fuchs, who conducts polls for Israeli media, said previously undecided voters threw their support to Lapid in large numbers. Pollster Mina Zemah said support surged for Lapid in the last few days of the campaign, and he drew about 50 percent of his support from the right.
Lapid said the election outcome reflected a longing for unity in a country beset by schisms.
"The citizens of Israel today said no to politics of fear and hatred. They said no to the possibility that we might splinter off into sectors, and groups and tribes and narrow interest groups. They said no to extremists, and they said no to anti-democratic behavior," he said.
Tensions with the United States, Israel's most important ally, also may have factored into the shift to Lapid. President Barack Obama was quoted last week as saying that Netanyahu was undermining Israel's own interests by continuing to build Jewish settlements on occupied lands the Palestinians want for a future state.
Netanyahu has won praise at home for drawing the world's attention to Iran's suspect nuclear program and for keeping the economy on solid ground at a time of global turmoil. But he has repeatedly clashed with international allies over his handling of the peace process, which has stalled over the issue of Israel construction in Jewish settlements in the war-won West Bank and east Jerusalem.
(Copyright 2013 by The Associated Press. All Rights Reserved.)