By Dan Williams
JERUSALEM (Reuters) -Prime Minister Benjamin Netanyahu's rivals on Monday sought to finalise a unity coalition that would unseat the veteran Israeli leader, but political commentators saw a bitter fight ahead.
Centrist opposition chief Yair Lapid secured support on Sunday from ultranationalist Naftali Bennett for a "change" government of ideologically disparate rivals.
The deal, in which Bennett would serve first as prime minister under a rotation with Lapid, must be finalised by a deadline of midnight (2200GMT) on Wednesday.
Netanyahu, 71, is the dominant political figure of his generation and his challengers have little in common - save a desire to emerge from his divisive shadow and from unprecedented turmoil which has seen four deadlocked elections in two years.
Hoping to discredit Bennett and other rightists now negotiating with Lapid, Netanyahu has cast them as committing "the fraud of the century" which would, he said, imperil Israel.
Lapid's riposte was restrained.
"A week from now, the State of Israel can be in a new era. Suddenly it will be quieter. Ministers will go to work without inciting, without lying, without trying to instil fear all of the time," he said in a televised address.
Though he described Bennett as "my friend, the prime minister-designate" and voiced hope of a deal before Wednesday, Lapid cautioned: "There are still plenty of obstacles in the way of the formation of the new government."
Israelis were divided about everything except the folly of writing Netanyahu off.
"An event took place yesterday whose importance cannot be overstated. A real possibility was created ... an alternative government in every sense of the word," wrote Sima Kadmon in the best-selling Israeli newspaper Yedioth Ahronoth.
NOT OVER YET
But she added: "It’s not over yet. Long days loom in which Netanyahu will do absolutely everything to shift the momentum."
Netanyahu faces other troubles, chiefly a corruption trial for bribery, fraud and breach of trust. He denies all charges.
The veteran Likud Party leader is a survivor: he was first elected prime minister in 1996 and he returned to power in 2009, holding the top office for more than a decade.
Israel Hayom, a pro-Netanyahu daily, described Bennett and Gideon Saar, another rightist in talks with Lapid, as being "in service of the left". Netanyahu has kept the door open to them, maintaining he is still capable of forming the next government.
If Bennett and Lapid miss Wednesday's deadline, parliament can choose a candidate to for a new coalition. Should that fail, the country goes to a fifth election.
However, a source briefed on the Bennett-Lapid power-sharing talks, which also include liberal and centre-left parties, said there had been "significant progress" toward a final deal, adding: "There's a lot more that unites than separates."
Bennett, a former defence minister, and Lapid, a former finance minister, both want to invest in education and health, and to head off economic malaise from the COVID-19 pandemic.
However the new coalition will likely mean a stalemate on the Israeli-Palestinian conflict, with marked policy differences between the coalition partners.
Bennett has favoured Israel annexing parts of the occupied West Bank, while his prospective left-leaning allies may argue for ceding territory to the Palestinians.
The source briefed on the talks indicated that Bennett and Lapid had agreed to sidestep the issue: "There's not going to be annexation, there's not going to be final-status withdrawals."
"Final status" is a diplomatic term for an Israeli-Palestinian peace deal, negotiations on which stalled in 2014.
Israel's financial markets were mostly unchanged on Monday with the shekel holding steady at 3.25 per dollar.
Once a coalition is formed, investors will expect passage of a 2021 state budget. Because of the two-year political stalemate, Israel is using a pro-rated version of the 2019 budget, which was approved in mid-2018.
(Additional reporting by Steve Scheer; Writing by Dan Williams, Editing by William Maclean)