Elections canceled • Prime Minister Benjamin Netanyahu now stands at the helm of the broadest coalition in Israel´s history, with 94 MKs • Kadima´s Shaul Mofaz vows to work to change Tal Law, system of government, pass budget, and advance peace process.

Prime Minister Benjamin Netanyahu and Kadima Chairman Shaul Mofaz dropped an unprecedented political bombshell early Tuesday, as the two decided to join forces, establish a national unity government, and cancel plans for what only hours earlier had seemed to be an inevitable early election.

Mofaz announced before dawn that Kadima, the head of the opposition until the agreement was reached and the biggest faction in the Knesset with 28 seats, would be joining Netanyahu´s Likud-led coalition to advance two flagship issues: the modification of the system of government in Israel and the equal enlistment of all populations to the military.

The deal between the two parties stipulated that an alternative to the Tal Law, which exempts ultra-Orthodox men from mandatory military service, would be submitted by July and that a deal would be reached by December to alter the system of government. In exchange, Kadima vowed to ensure that the current government would remain intact for its full term, which ends in November 2013.

Mofaz said that parliamentary taskforces headed by Kadima representatives would be established to advance these issues. Under the deal, Mofaz will be named deputy prime minister, and Kadima will be given the chairmanship of the Knesset Economics Committee. It already chairs the Knesset Foreign Affairs and Defense Committee.

The move was especially surprising in light of recent remarks made by Mofaz, who has insisted repeatedly that he would challenge Netanyahu´s failing leadership and swore that he would never join Netanyahu´s government. Even more surprising was the timing: The meeting in which the unity deal was struck was held simultaneously with a vote on a bill to dissolve the Knesset and hold early elections on Sept. 4. The bill was nearly unanimously approved (110 in favor versus one against) in its first reading, with Kadima voting in favor.

The second and third readings of the bill were called off when the unity government was announced. Coalition Chairman MK Zeev Elkin actively delayed the legislation process, after the bill was already approved, to allow the negotiations between Netanyahu and Mofaz to bear fruit.

"This move was begging to happen," said one Kadima member. "The prime minister gets the political stability he wanted, and Mofaz gets to delay the elections, which, had they been held now, would likely have crushed him."

At 2 a.m., the Likud and Kadima factions convened separate emergency meetings for a briefing on the new development. "I didn´t want to go to elections," Netanyahu explained to his party. "But I saw the coalition begin to unravel, so I went for it." He added that the unity deal had been coordinated with coalition partners Yisrael Beitenu and Shas, who supported the move.

Netanyahu and Mofaz held a joint press conference around noon Tuesday, during which Netanyahu said that political stability is of utmost importance to Israel at this time. He praised Mofaz for the decision to join the coalition, saying Mofaz "took an important step."

"When I thought that the government´s stability was being undermined, I was ready to go to elections," Netanyahu said. "But when it became clear to me that it would be possible to establish an extremely broad government, I understood we could restore stability without elections."

Meretz MK Nitzan Horowitz interrupted Netanyahu as he spoke, shouting, "This is corruption in the fullest sense of the word," before being removed from the press conference.

Netanyahu said his new coalition government would promote a "responsible" peace process with the Palestinians, as well as presenting a "responsible" alternative to the Tal Law and a "responsible" budget that would take economic and social concerns into consideration.

"The peace process is stalled because the Palestinians are not willing to resume negotiations," Netanyahu said. "Maybe now they will reconsider. We have been prepared to resume talks in the past, and still today. I hope that they take advantage of this opportunity to return to the negotiating table and conduct responsible talks in which both sides will have to make painful decisions."

He also said the new coalition government would hold serious talks about Iran´s nuclear program, although Mofaz has previously spoken out against an Israeli strike on Iran – something that Netanyahu and Defense Minister Ehud Barak are said to support.

Netanyahu told the news conference Tuesday that he and Mofaz already have had many discussions about Iran and would continue to hold "serious and responsible" talks on the matter. As a former military chief, Mofaz´s opinion could carry great weight in a decision on whether to strike.

Netnayahu also said he had offered former Kadima head Tzipi Livni the chance to be part of a unity government twice. "I am very glad that Shaul Mofaz accepted the offer," he said. "I have received the blessing of the other parties for this move. This is not a fake unity – it is for the sake of action and for strengthening of the State of Israel."

For his part, Mofaz said, "I made a decision to join the prime minister and he expressed an openness to issues that are a part of the Kadima platform. We decided to undertake a historic move. This was not extortion." Mofaz said he wanted to be a part of discussions on national and defense issues that are crucial to the State of Israel. "I didn´t ask for a portfolio," he said. "He offered me one, but I won´t say what. I will be involved in all the issues Israel currently has to deal with, and I promise you that our impact will be felt."

When asked about recent remarks he had made, calling Netanyahu a liar, Mofaz replied, "The prime minister and myself have decided to put the past behind us."

Mofaz said there are moments when a nation has to make difficult decisions and leaders have to make difficult personal choices as well. "Together, we can change things in Israel," he said.

"This is the biggest national unity coalition, which is important for the future of Israel – 94 coalition members would know how to deal with future challenges facing Israel. We are here to join forces and confront the challenges - which are not easy challenges that lie ahead," Mofaz said.

Mofaz also commented on the deadlocked talks with the Palestinians, saying, "We will continue to discuss how to move forward to achieve an understanding with the Palestinians, but we have to talk about borders and security arrangements first."

Mofaz added that it would have been easy to remain in the opposition, but "when you have this kind of political power – and Kadima has 28 seats – it would have been irresponsible of me to decline [joining the coalition]."

He said that joining a unity coalition would ultimately serve to benefit Israel and its citizens. "The fact that Kadima was not a partner in a unity government until now was a mistake," he said.