Alliance and defiance

During the three or four months each year they live in Israel, Eddy and Dmumit Hose visit lifelong friends and enjoy the rich history of their native country. But Mrs. Hose avoids the road to Tiberius if she can (there have been several "incidents" there), and she always enters the shopping mall near her home in Netanya from the back entrance-all three terrorist attacks on the mall took place near the front.

Mr. Hose, 76, smiles at his wife's re-routing tactics, but acknowledges that he, too, views his surroundings through the grid of terrorist attacks. He was at the Netanya shopping mall just hours prior to the 2005 bombing: "Every time I pass through that intersection, I've been aware that it was the third attack there. You're aware of it every time you go to a shopping center or theater." The April 17 suicide bombing in his home town of Tel Aviv is another reminder of the precarious position the tiny nation has been in since its birth-one Mr. Hose fought for-on May 14, 1948. In 2006, the battle over this small plot of real estate hasn't changed much.

But if the security landscape is familiar, the political landscape is changing forever. For the first time in their history, Israelis elected a party other than socialist Labor or hawkish Likud to lead their government. And as the centrist Kadima party steps into the forefront of Israeli politics, its debut involves forming a coalition majority-at least 61 Knesset seats. Kadima's Interim Prime Minister Ehud Olmert carefully picked his partners, and the parties formalized the deal on May 4.

Mr. Olmert's criteria centered on his intent to finalize the nation's borders by 2010, beefing up certain Israeli settlement blocks and excluding some Arab towns in the West Bank. Most of East Jerusalem-claimed by Palestinians as their future capital-would remain in Israeli hands under Mr. Olmert's proposal. His plan includes completing the 4-year-old border fence-designed to help prevent terrorist attacks-by the end of the year.

The Pensioners Party was the first to sign on, and a deal with Labor-the second-largest party in the Knesset-unfolded without much difficulty. But convincing the ultra-Orthodox Shas party to join the coalition involved weeks of haggling. The party agreed to sign on only after Mr. Olmert granted a waiver regarding support of any future withdrawals from the West Bank, a concession he hoped he wouldn't have to make.

Mr. Olmert was also courting Yisrael Beiteinu, a party known for a controversial population-exchange proposal that would negate the citizenship of at least 150,000 Arabs and deport them to the Palestinian Authority. "Israel is our home, Palestine is their home," the party's platform states. The proposal places many of Israel's Palestinian Christians-already caught between Muslim and Jewish majorities-at risk of losing their citizenship.

The Russian-immigrant-backed party recently decided against joining the coalition government, though, claiming Mr. Olmert's withdrawal plan caters to the left and compromises national security.

As Mr. Olmert began carving out his leadership, his dovish choice of Labor head Amir Peretz as defense minister raised some eyebrows. The majority of Israel's defense ministers have been legendary war heroes-Mr. Peretz served as a military supplies officer and founded his political career upon social issues.

Further, just as Mr. Olmert began his assigned task of forming the new government, his leadership was put to the test when a suicide bomber blew himself up during Passover at a Tel Aviv falafel restaurant, killing nine people and wounding 60. Islamic Jihad claimed responsibility for the April attack-an unsurprising confession in light of the terrorist organization's refusal to honor the informal cease-fire Israel and Palestinian President Mahmoud Abbas agreed to last year.

Responses to the terrorist attack are perhaps telltale signs of how difficult-if not impossible-will be future Israeli-Palestinian negotiations under new leadership. Mr. Abbas-elected separately and struggling to maintain control of his Hamas-led parliament-condemned the attack as contrary to Palestinian interests. He recently warned the new leadership that he had the power to dissolve the parliament and is trying to garner support from the international community for further peace negotiations, with or without Hamas. Hamas, on the other hand, condoned the attack, calling it a legitimate response to Israeli aggression.

The Palestinian government, meanwhile, is crippled from international isolation and an aid embargo that has left the leaders unable to pay more than 150,000 government employees. Yet the government still refuses to change its defiant stance toward Israel.

Although it has partially agreed to a cease-fire with Israel, speculation abounds that it is merely allowing Islamic Jihad to serve as its unofficial military wing. With a designated terrorist organization in power that refuses to acknowledge Israel's existence or renounce violence, Mr. Abbas' Fatah party is continually at odds with the Palestinian parliament.

"We are witnessing a potentially dangerous deterioration of the situation in the Israeli-Palestinian conflict," UN envoy Alvaro de Soto told the Security Council at the end of April. "Lawlessness, already endemic, is worsening amid uncertainties concerning command and control of the security forces . . . and signs of a struggle, still unresolved, between the presidency and the new government."

Hamas, Islamic Jihad, and Iran appear to be in lock step. The three entities met in April during a Palestinian solidarity conference just days after Iran announced its acquisition of enriched uranium. Iran has repeatedly threatened to destroy Israel.

Russia recently launched a technologically advanced spy satellite for Israel designed to monitor Iran's nuclear facilities, but on that same day confirmed its intention to sell 29 air-defense missile systems to Iran.

Israel, meanwhile, is in a state of transition, concession, and caution. Mr. Olmert did not order a retaliatory strike after April's suicide bombing, even though the attack was the deadliest in four years. Many blame that decision on the controversial defense minister. Coupled with the Gaza pullout last August, the formation of Kadima amid a somewhat lackluster voter turnout signaled a shift in the nation's fight for survival-made more difficult by former prime minister Ariel Sharon's shift in policy, followed by a stroke that left him incapacitated. "On the Israeli side there has been a messianic fervor to resettle the territory and capture the whole territory for Israel. The pullback from Gaza put a damper on it," Mr. Hose said. The new party, he said, confused voters.

Neither the shakeup nor the intransigence of Hamas has overtly changed U.S. policy, which is to oppose unilateral moves by Israel: "The whole final status has to be resolved in negotiations between the parties," U.S. Embassy spokesman Stewart Tuttle said in Tel Aviv. "No unilateral initiative will contribute to President Bush's vision of two states living side by side in security."

But in the current political shakeup, the defining borders of those two states remain uncertain. Many Palestinians want Israel to concede any land acquired during the 1967 war-this includes all of the West Bank and East Jerusalem.

Mr. Hose says a return to pre-1967 borders is no longer realistic. There are too many homes that would need to be moved, he says, and Israelis would have to travel in a large semicircle when going from the north to the south. Many Israelis also remember being prohibited from visiting their holy sites in Jerusalem during pre-1967 Arab rule over the city.

Demographics factor into border drawing as well. With the Arab birthrate much higher than its Jewish counterpart, mapping certain towns out of Israeli borders is necessary now to keep Jewish concentration high. "The Israelis have realized they have a demographic time bomb, and they might not have a Jewish state in 20 years," said Mr. Hose.

Winning international support is key to forward momentum on both sides. Mr. Olmert has scheduled a three-day visit in May to talk with President Bush about the stalled peace process and the growing threat of Iran to Israel. In June he plans to meet with Egyptian President Hosni Mubarak, whose country has been a strategic ally in recent years. With death wishes coming from all sides, Mr. Olmert has a long road ahead of him, and allies will be crucial to the nation's survival.

During a recent trip to Oslo, Mr. Abbas urged the international community to help aid future peace talks and to prevent a humanitarian crisis in areas under Palestinian authority. The United States, Israel, and Europe are all boycotting the new Hamas-led government in an attempt to force the terrorist entity to change its stance. Several Arab and Muslim countries, including Iran, have pledged aid packages, but the money has not yet reached Palestinian coffers and is far short of the amount needed to keep the government afloat.

Faced with what looks like intransigence on both sides, longtimers are skeptical as Israel celebrates its independence on May 14. As his mind drifted back to the war he fought as a 16-year-old and the injuries he incurred in Beit Hanun-now a Gaza launching pad for Qassam rockets-Mr. Hose said, "My generation is no longer optimistic. Optimism belongs to the youth."