The single best pundit of Israeli politics is, of course, Nahum Barnea of Yediot Acharonot. However, most of what he writes doesn't get put onto the Web, since his employers want people to buy their dead tree version, and even the articles that do find their way online more often than not don't get translated to English.
Yossie Verter of Haaretz, however, is pretty good, and he's easy to find online in English since Haaretz has a different business model (an inferior one but that's not my subject). Yesterday Verter tried to explain what's going on in the negotiations towards forming a government. No one really knows, of course, but Verter's description rings true. The essence of it is that Bibi and Tzipi are playing poker. She wants a power-sharing government with a rotating prime minstership, Bibi the first two years, then she for the next two years. Bibi wants a government with Kadima, but intends to bring along some of his natural (or not-so-natural) allies; and he extremely definitely decidedly completely determinately isn't in favor of a rotating prime minstership. Their sticking point is a declaration of acceptance of partition and the two-state solution: Tzipi demands such a declaration, Bibi refuses. Their reasons are that Tzipi expects that such a declaration will frighten off Bibi's more lunatic allies, such as Ichud Leumi, the far-right settler party which has four MKs; once they're gone Bibi will have lost his block, and he'll have to offer her the parity she wants. His position is the mirror image of hers, with the addition that he really doesn't want that far-right coalition, but he expects that in a week or two parts of her own party will begin clamoring for government posts because otherwise they'll revert to being mere mortal MKs, heaven forbid.
On the face of it, this is all pure spin, maneuvering and poker. After all, with the possible exception of Ehud Olmert, there is no individual in the entire state of Israel who knows better than Tzipi Livni that peace with the Palestinians is not in the cards for the time being. She and Olmert, after all, have spent much of the past 18 months or so dealing directly with the top two Fatah Palestinian leaders, the so-called moderates, Abu Mazen (Olmert) and Abu Ala (Livni). They talked and talked and talked, and no-one stopped them from reaching agreements, proclaiming peace, signing agreements, celebrating at the White House and getting Nobel Peace Prizes. I didn't stop them, and neither did you. The reason it didn't happen was that the distance between the positions of these moderate Israelis and moderate Palestinians are, at present, unbridegeable, and have to do with the Right of Return but also all sorts of other matters - and also, one might add, with the total inability of the Palestinian side to deliver, what with Hamas being actively hostile to the whole idea.
So why are Tzipi and Bibi fighting over such a demonstrably non-issue? I can think of three explanations. The first is that one or both of them are idiots. This could be the case, of course, one should never over-estimate one's political leaders, and history is chock full of political and military leaders who in hindsight at least must have been fools.
The second explanation is that one of them is bluffing, or perhaps even both, but no-one knows which of them (or both). In this scenario, one of them will blink, but not yet. The time for blinking will be during the last of the six weeks Bibi legally has to form a government. At that point, either he'll decide her version is better than the best he's managed to cobble together, or she'll decide what he originally offered is better than sitting in the opposition. Whichever of them blinks will, of course, have a rational explanation along the lines of "I've changed my mind for the Greater Good, Call of Duty" and so on.
The third explanation is actually serious, and has to do with opposing appraisals of reality. The fact that both know no agreement can be reached with the Palestinians doesn't mean they agree with the implications. Bibi looks at the situation and figures it isn't time to clash with his natural allies nor with his (very old and idealistic) father, nor with his own preferences, and will say that since the Palestinians don't want peace on terms any electable Israeli can offer, screw them and let's do what is most convenient. Tzipi, on the other hand, says that in spite of there indeed not being any Palestinian with whom to make peace, it's important that we preserve the impression that we're willing to walk the extra mile only there's no peace at the end of it. This position assumes the Obama administration will put pressure on both sides as the Bosh administration didn't, and prefers to go along with the American demands so that even the Americans understand who's being reasonable and who isn't. This is called "intelligently managing the conflict", and I'm reasonably convinced Livni's tactic for doing so is better than Netanyahu's. But maybe that's just me.