Israel's mistaken bombardment of the UN post…

Israel's mistaken bombardment of the UN post at Qana has damaged Peres's standing among Israeli Arabs.

In addition, Labor has lost popularity among religious voters because of its alliance with Meretz.

The elections of May 29, 1996 are the first held under a new law that allows separate ballots for prime minister and the Knesset, which has been designed to reduce the ability of smaller parties to exact concessions when governments were formed.

However, this law has the opposite result: it creates a quasi-presidential regime that still depends on an increasingly fractured parliament.

The impact of the bombings and a lackluster campaign by Labor has paved the way for a stunning upset at the polls on May 29.

On election day, blanket support for Netanyahu from religious Jews opposed to Labor's perceived secularism and Peres's perceived readiness to contemplate a Palestinian state that would include part of the "Holy Land" of Israel finally turns the tables, and in Israel's first-ever direct election of the prime minister, Netanyahu edges Peres by less than one percent of the popular vote.

In the Knesset, however, both Labor and Likud unexpectedly lose ground, while the smaller ideological and ethnic parties, especially the religious bloc, gain large numbers of seats.

An ethnic Russian party, Yisrael B'Aliyah, led by the celebrated Soviet-era dissident Anatoly (Natan) Sharansky, also wins seats.

The growth of the Shas Party and the emergence of a Russian ethnic bloc offer compelling evidence not only of their grievances against previous governments but of the failure of the major political parties to integrate these constituencies.

Ehud Barak is elected to the Knesset.