Netanyahu over the Line but Faces Testing Fourth Term

After weeks of coalition wrangling, Benjamin Netanyahu started his fourth term as Israeli premier Friday, but he faces an even tougher task to mend fences with the United States and Europe.

Soon after its narrow approval by parliament late Thursday, the new rightwing government was warned by Washington that it must forge a deal with the Palestinians for its own good.

Chairing his first cabinet meeting overnight, Netanyahu said his administration would "continue to work for a diplomatic solution (to the Palestinian conflict) while upholding the vital interests and security of the citizens of Israel".

Like the coalition agreement published this week, it made no mention of the "two-state solution" -- the concept of a sovereign Palestinian state alongside Israel which is favored by the U.S., the United Nations, the EU and the Arab League.

U.S. President Barack Obama pointedly mentioned it in remarks shortly after parliament ratified Netanyahu's government by 61 votes to 59.

"I continue to believe a two-state solution is absolutely vital for not only peace between Israelis and Palestinians, but for the long-term security of Israel as a democratic and Jewish state," said Obama.

"I know that a government has been formed that contains some folks who don't necessarily believe in that premise, but that continues to be my premise."

That government largely consists of nationalist patrons of West Bank Jewish settlement, the ultra-Orthodox, and opponents of Palestinian statehood.

The Palestinians have already slammed the coalition, with chief negotiator Saeb Erakat calling it a "government of war".

"Netanyahu is vehemently leading the charge to bury the two-state solution," he said.

The international community has been watching since Israel's March 17 general election to see what sort of coalition emerges from the weeks of political horse-trading that followed.

European diplomats say that over the summer France is expected to renew its efforts to get a U.N. Security Council resolution on ending the conflict.

Israel insists the only path to a solution is through direct, bilateral talks with the Palestinians, and has bristled at U.N. involvement to set a timeframe for a deal.

As Israel's potential diplomatic challenges mount, Netanyahu has so far not appointed a full-time foreign minister, preferring to keep the portfolio to himself for the time being.

He has instead named Tzipi Hotovely, from the far right wing of his Likud party, as deputy foreign minister, an appointment the Jerusalem Post warned was unlikely to win new friends around the world.

"One can only imagine the cables diplomats from the U.S. to New Zealand, Britain to Spain, sent their home offices regarding the new government: 'A narrow hard-right government with the foreign ministry to be run day-by-day by Hotovely, a proponent of a one-state solution... very close to the settlement community,'" diplomatic correspondent Herb Keinon wrote.

"In other words, Hotovely represents the opposite of everything much of the world, including U.S. President Barack Obama, wants to see in Israel," he added.

The left-leaning Haaretz newspaper warned in an editorial that the new government must address fundamental issues quickly.

"Israel cannot allow itself to waste any more time. Ending the occupation and the struggle over the democratic character of the state must be at the top of the agenda of the entire leadership," it said.

"The fourth Netanyahu government is one devoid of vision and of any new, positive messages. We can only hope that it will not last long."

With his knife-edge parliamentary majority Netanyahu, is vulnerable at any moment, not only to the highly vocal opposition but also to disgruntled allies.

In his speech to the assembly Thursday night he called for electoral reform to increase political stability and implied he would seek to expand his narrow coalition.

But opposition head Issac Herzog firmly rejected any notion of joining.

"No decent leader would join this circus that you've formed at the last moment with barely a majority for the sole purpose of perpetuating your regime," Herzog said.