Israeli Prime Minister Benjamin Netanyahu clinched a deal to form a new government, but his narrow coalition will have only 61 of parliament's 120 seats, raising fears of instability.

Late on 6 May, only hours before the deadline to form the next coalition expired, Netanyahu sealed the final deal with the ultra-nationalist Jewish Home party, which advocates annexation of parts of occupied territory Palestinians seek for a state, paving the way for a coalition ruling by the slimmest of majorities in Israel's turbulent parliament.

On the streets of Jerusalem on 7 May, residents welcomed the news that a new government had been formed, but voiced concern over its ability to govern and last through its four-year term.

"I'm happy there is a government already, I think we have been waiting way too long and I think it's a shame that it's not a stronger government because most of the country voted for the right," said Jerusalem resident Sharona Rabinovitch.

Erez Goldaman, another resident in Jerusalem, said the new government should make it a priority to change the current system that many see as weakening the main parties.

"I'm glad that Bibi [Benjamin] Netanyahu managed to create a new government. On the other hand I'm not so happy the way it's been done. A small coalition is not good for us and I think it's about time that the government and the Knesset members will sit together, all parties, and find a solution and a new system in the elections so the prime minister can rule with no fear of a new election every year or every two years," he said.

Coalition struggles

Netanyahu had struggled to put together a coalition for nearly two months after an easy election victory, after a former ally, leader of the far-right Yisrael Beitenu Avigdor Lieberman, abandoned him earlier in May.

With Jewish Home, the ultra-Orthodox United Torah Judaism and Shas parties and Kulanu, a centrist faction, the Likud-led government will control 61 of parliament's 120 seats.

Such a narrow majority will make Netanyahu vulnerable to policy demands from even his most junior partners, continuing a long tradition of instability in Israeli politics. Netanyahu said he would seek to enlarge the coalition, but did not elaborate as to which party he would seek to add.

Jewish Home seems certain to push for the expansion of Jewish settlement in occupied territory, a policy that could deepen Israel's rift over the issue with its main ally, the United States, and the European Union. Bennett, the party's leader, has called for the annexation of parts of the West Bank.

That goes beyond Netanyahu's pledge to continue to build in settlements only in areas Israel Intends to keep in any future peace deal with the Palestinians.

In return for Jewish Home's support, Netanyahu bowed to its demand for the justice minister portfolio, a post critical to the smooth passage of cabinet-approved legislation to parliament for ratification.

Bennett is a strong supporter of a bill, promoted by Netanyahu, that would anchor in law the status of Israel as the nation-state of the Jewish people.

Critics, among them Israeli President Reuven Rivlin, have said it runs counter to the founding fathers' vision of equality for Arab citizens.

Other proposed legislation likely to be pursued would seek to limit the power of the Supreme Court to overturn laws passed by parliament and tighten controls over foreign donations to left-wing organisations.

Gil Hoffman, chief political correspondent and analyst for the Jerusalem Post said the government can enjoy stability if it focuses on socio-economic issues, but any international pressure to make concessions to the Palestinians could weaken it.

"What could make the government surprisingly stable is that it's completely homogenous, they are only on the right and then their focus is going to be on socio-economic issues on which all the parties in the government can unite. The only thing that could make the government unstable is if there is international pressure on the government to make concessions that the people of Israel currently after having rocket fly on Tel Aviv don't want to see happen until there's a more stable leadership on the Palestinian side and in the Arab world," Hoffman told Reuters.

He also questioned Netanyahu's ability to expand the coalition after both Lieberman and Isaac Herzog, Netanyahu's main election rival leader of the centre-left Zionist Union that won 24 seats, pledged to stay in the opposition.

"Netanyahu has said that he is forming a narrow government of 61 members of parliament out of a 120 temporarily and he will try to expand the coalition later. I personally don't see how he can expand the coalition later. Both Isaac; Herzog the leader of the Zionist Union on the left and Avigdor Lieberman on the right have said that they have no intention whatsoever of joining Netanyahu," Hoffman added.

A coalition pact between Netanyahu and Herzog would have ensured a broader coalition. But Herzog, who largely echoes Netanyahu in criticism of the framework deal world powers reached with Iran last month to restrict its nuclear programme, did not stray from his post-election pledge to take to the opposition benches.

On Thursday Herzog vowed to do everything in his party's power to fight the new government objectives, calling it a "failure".

"All I can say is that the government to be formed is a government which is a failure government, a failed government which will lead nowhere, which will lead Israel into dangerous directions. We will present a strong, firm opposition that will not enable the government one moment of ability to function. We will challenge it on all fronts and make sure that the public that gave us a a vote, support, will see that we are fighting for the large causes of the state of Israel, the general public, on all spheres that are so important for Israel," Herzog said speaking in the Israeli capital Tel Aviv.

Shortly after the 17 March election, Netanyahu appeared to be coasting toward a right-leaning government with control of 67 parliamentary seats and voiced confidence he would be able to form one quickly. President Rivlin initially gave him 28 days to do so.

But on Monday (May 4), Foreign Minister Lieberman, whose once-strong relationship with the Israeli leader turned sour long ago, took his far-right Yisrael Beitenu party out of the coalition talks.

That left Netanyahu with only 53 seats, making Jewish Home's backing essential to ensuring the unexpected election win would result in a fourth term for the 65-year-old leader.

Had Netanyahu not met Wednesday's deadline, the President would have been obligated by law to appoint another legislator to try to form a government.