The parliamentary faction representing the party that founded and built the state of Israel and that dominated its governments for decades was today reduced to mere single digits -- Israel's Labor Party now has eight members in the Knesset. This latest dilution resulted from a move that took everyone by surprise, enacted by its now-erstwhile leader, still the country's defense minister, Ehud Barak.

To make any sense of the shock that has just convulsed Israeli politics, a very brief primer is in order. Israel is a parliamentary democracy in which the country is a single electoral district and members of the parliament, the Knesset, are elected on party lists according to a pure system of proportional representation (with a threshold of two percent for entering parliament). The system has always made for a proliferation of parties being represented in the Knesset, for government by coalition, with various rules being introduced over the years to prevent too much horse-trading, including one stipulating that for a new faction to split away from an existing party and be recognized with full rights in parliament, the breakaway faction must constitute at least one-third of the members of the mother party.

Ehud Barak took four fellow members of Labor's Knesset grouping with him to form the Atzmaut or Independence faction, thereby meeting that one-third bar (Labor had a total of 13 seats, the Knesset is a 120 seat parliament). The relevant Knesset committee has already approved the split and recognized Barak's new faction. The five-member Atzmaut will continue to serve in Netanyahu's coalition government and Barak will remain minister of defense. The rump Labor faction, with eight MKs, has announced its intention to quit the coalition, and the three ministers belonging to this faction all tended their resignations in the course of today (Benjamin ‘Fuad' Ben-Eliezer, Trade and Industry; Yizhak ‘Buji' Herzog, Welfare; and Avishai Braverman, minister for Minorities).

The most popular metaphor for now in the Israeli press harkens back to Ehud Barak and Benjamin Netanyahu's days in the Israeli army elite unit, the Sayeret Matkal - that this political move was a precision-planned, lightning and secret strike that took the enemy (in this case, the Labor Party that Barak himself was leader of while planning the mission as well as the opposition Kadima Party) by surprise.

Why did Barak do it? Why now?

Since formally returning to politics in 2007 after a six-year hiatus in the private sector, Ehud Barak's hold on the Labor Party has always been somewhat tenuous. In the last general election in 2009 Barak led Labor into its worst-ever result, with the party slipping not only to 13 seats but also now becoming only the fourth largest in the Knesset, having never before in history been out of the top two. During nearly two years serving in a hard-rightist coalition not only with Likud but also with Avigdor Lieberman and the religious-orthodox right, Labor's popularity slipped even further, and talk of quitting the coalition became a constant background hum.

In recent months, as a slew of anti-democratic and racist legislative initiatives were advanced by Labor's government allies and as even the façade of a functioning peace process was removed (and Labor's justification for being in the coalition was to ‘save the peace process'), many Labor ministers felt uncomfortable in the government and attacked its policies. The end was near. Several MKs were pushing to bring forward party leadership elections to unseat Barak and to pull Labor out of the government. Convening the party's institutions to vote on these initiatives seemed imminent.

In other words, the Barak-led split was a preemptive move. This maneuver allowed Ehud Barak to maintain some control of the situation and take the initiative, rather than waiting for his party rivals to define the next moves. Had he waited any longer, it might have been more difficult for the other four MKs to jump ship, and all four seem to have been offered plum jobs, mostly ministerial.

The name of the new faction, "Independence," is being treated with deep irony, it is anything but that. It is as much a creation of Netanyahu's as it is Barak's, and is dependent on the former's good will. The only part of today's drama that surprised no one was that Ehud Barak himself would betray the Labor Party in order to save his own political skin.

Bizarrely for someone who has twice served as leader, Barak has never struck deep roots in the party. Barak joined Labor when Yizhak Rabin made him a minister in 1995, only six months after ending his 35-year military career. Within two years he was party leader, and two years after that, prime minister. His political career has been punctuated by the occasional police investigation and allegation of corruption, but even more consistently by a prevailing sense that he was a Trojan horse inside both the Labor Party and the Israeli peace camp.

Barak had already tried to morph the Labor Party into something else when he subsumed Labor under the "One Israel" banner in the 1999 election. Many consider Barak to have single-handedly snuffed out the remains of Israel's peace camp when Barak himself declared there was no Palestinian partner after the failure of the Camp David negotiations in 2000. The "No Partner" meme has become a defining motif of the Israeli discourse ever since. Barak presided over the total loss of support for Labor amongst the Palestinian Arab population in Israel, and once Kadima was formed, mostly as a Likud breakaway, and later when serving in the Kadima-led Olmert government, Barak chose to relocate Labor from its natural place - to the left of Kadima - to a more hawkish centrist position to Kadima's right.

Ehud Barak was PM when the second Intifada started and initiated the assassinations policy against mid-level political in addition to resistance leaders on the Palestinian side; he oversaw a massive upturn in settlement growth and was defense minister during Operation Cast Lead. Alongside all of that, Barak pulled Israel out of southern Lebanon in May 2000, ending an 18-year occupation. But he did so unilaterally - having recanted on a prospective peace deal with Syria at the last moment - and in doing so he greatly embellished the popularity and reputation of Hezbollah.

Perhaps Barak's political career has simply been a reflection of the inevitable Israeli shift to the right given 40 years of occupation and the ongoing inability to create a liberal narrative for what the marriage of a Jewish and democratic state might look like. Many though would argue that Barak himself, more than Lieberman or Netanyahu or any other politician, has been the harbinger of the deeply illiberal winds blowing through Israeli politics today.

What next for Netanyahu's coalition?

When rump Labor's departure from the coalition is formalized Netanyahu will be left with a majority of 66 MKs out of 120, and typically all sides are claiming victory. PM Netanyahu is asserting that his coalition is being strengthened while opposition leader Livni is insisting that this is the beginning of the end for Netanyahu's government. And both have an element of truth on their side. It is probably more accurate to look at this development as Netanyahu having gained four loyal coalition members, than having lost eight. Most of those who have now quit tended to vote against the government in parliament anyway. All had one foot out the door.

The bigger threat to Bibi was to lose all 12 Labor MKs (I say 12 rather than 13 as the assumption, for me at least, was that even if Labor left, Ehud Barak would stay on alongside Netanyahu), and to lose all of Labor in circumstances not of his choosing and potentially more damaging to his premiership. By retaining the five members who have now become the Atzmaut faction, Netanyahu's coalition has more of a cushion (62 becomes a very narrow coalition indeed), and he also now continues with relative confidence that there are no more potential departures in his coalition due to foot-dragging on peace.

In as much as there is ever certainty in Israeli politics, this development has also laid to rest the option of Kadima joining Netanyahu's coalition and the idea frequently floated of a Likud-Kadima-Labor governing formation in this Knesset.

The opposition has been strengthened, not only numerically but also by removing the fig leaf of national unity and centrist positioning that Netanyahu's government claimed by virtue of Labor being a partner. While it is true that Ehud Barak and the other four ex-Laborites are still there, the storyline in the media and in the political world will be unequivocal - that this was a cynical and self-indulgent move by Barak and friends, and that anything remaining of the social-democratic or center-left parliamentary camp in Israel now exclusively resides on the opposition benches. It will also now be easier for Livni to paint this government as a narrow rightist religious coalition (although to be fair, the government was doing a rather good job of that on its own).

And one must not forget the disagreements and instability within Netanyahu's governing majority over a number of domestic issues, mainly in the arena of the religious/secular divide. Netanyahu will now be more dependent than ever on the Shas and Yisrael Beiteinu parties and their respective leaders, Interior Minister Eli Yishai and Foreign Minister Avigdor Lieberman. They are currently at loggerheads over a piece of legislation relating to religious conversions conducted inside the Israeli army. A government-threatening coalition crisis involving one or both of these parties could erupt at any moment.

Netanyahu is already under severe criticism in demonstrating insufficient leadership and for allowing Lieberman and Yishai to set the national agenda - the prime minister's poll numbers are down, and these trends will likely be exacerbated by the new coalition reality. And there is another known unknown that awaits the prime minister's coalition - a decision is due to be taken in the coming weeks over whether to pursue charges in an investigation into Foreign Minister Lieberman's financial dealings that stretches back over more than a decade.

What does this mean for peace efforts and the Obama administration's approach?

In responding to today's political development, Prime Minister Netanyahu made a point of saying that all those who are banking on his political implosion, and notably the Palestinians, should get the message that it is time to deal with him and return to negotiations. He even blamed Labor's departing ministers for encouraging the Palestinians stay-away from the negotiating table. The Israeli and Palestinian leaders' respective chief emissaries, Izhak Molcho and Saeb Erakat, have both been in Washington over the past few days, but the Israeli-Palestinian talks, fleetingly resumed in September, remain stillborn.

The Labor Party split serves to clarify rather than change the existing political dynamic - one of absolute impasse on the Israeli-Palestinian front. There is no prospect of meaningful change being generated internally by the Israeli side. Netanyahu is now under even less and perhaps no pressure from his coalition to do anything on the peace front. The US has so far decided not to step into this vacuum with a clear effort of its own.

It may be that Netanyahu considers that the time will soon be ripe to introduce an initiative of his own, the logic being that, assuming US timidity, he is in a strong position and that he rather than the Palestinians can define the agenda for 2011. Any such Netanyahu initiative is likely to be extremely limited in its scope - forget any settlement evacuations or serious territorial adjustments and think instead of more economic projects, attempts to entrench the PA as a subcontractor for Israel, and perhaps the notion of a vaguely defined and territorially inconsequential Palestinian mini-state.

Despite the (now somewhat revised) calming assessments of Israel's outgoing Mossad chief regarding Iran's nuclear program, Netanyahu has also been upping the ante on that front, demanding that a credible military threat be on the table. Add to the mix the renewed tensions in Lebanon; the replacement of the current crop of somewhat cautious leadership figures in Israel's security establishment (the heads of the IDF, Mossad, and Shin Bet have either just switched or are about to); Barak-Netanyahu's need to show leadership and purpose and their willingness to work with an equally willing Republican congressional leadership in cornering Obama -- a period of instability and brinkmanship replete with danger may well be on the horizon.

A divided Palestinian leadership - able to take piecemeal initiatives but bereft of strategic direction - and the neighboring Arab states that are now even more regime-maintenance skittish and obsessed following protests at home and the overthrow of President Ben-Ali in Tunisia, are unlikely to be driving the agenda for change.

Faced with all of this, the US may throw up its hands. In fact, distancing itself from a discredited and demeaning peace process might well be one of the better options that the US has. Were the administration to tell the parties that it is ready to reengage only when they themselves demonstrate real seriousness and purpose or to be more honest and also more risky, to lay the dead cat at Netanyahu's door, then some US credibility might be restored the domestic debate inside Israel could be constructively shaken up.

The US will still, though, have to be making daily decisions on how it relates to the Israeli-Palestinian conflict and to be dealing with the resonance that the Palestinian issue and America's role in failing to resolve it has throughout the region. Absent US leadership we are likely to see more initiatives gather pace in the international diplomatic arena (such as UN resolutions and recognition of a Palestinian state on 67 lines) and the danger of local tensions escalating into conflict. If the US places itself on the wrong side of these developments, wielding its UN veto, or failing to stand up to an ever-more pugnacious Netanyahu-Lieberman-led Israeli government for instance, then one can expect a further and perhaps worrying erosion of America's ability to wield influence and power, to build alliances, overcome adversaries, and avoid bloodshed.

A requiem for Israel's Labor Party

First as Mapai, then as the Alignment (or Ma'arakh), and more recently as Labor, one political movement defined the first half of Israel's 60 years and has been a key shaper of Israel's history throughout its existence. For half a century from 1949 to 1999 and through 14 Knesset election cycles, Labor under its various guises dropped below 40 seats on only three occasions and never below 30. As of today, Labor is in single-digits with only eight seats, and the end of Labor Israel would be an event of historical magnitude. Barak's departure was devised together with Likud leader Netanyahu. It is fair to say that for the last two years Barak has been playing the Labor Party according to a musical score written by Netanyahu. In effect, Likudniks have been running all of Israel's four largest parties - Netanyahu was and remains Likud and has also been running Labor by remote control via Ehud Barak (as just became crystal clear), Lieberman and Livni both grew up politically in the Likud.

For the time being, Israel's future will be decided according to how political and ideological arguments play out within the Likud revisionist camp. That is a reality that would have seemed inconceivable to Israel's founders, although they are perhaps partly to blame for never developing a sufficiently progressive and inclusive vision of Israeli democracy, ceding the ideological debate at key moments to a more narrow, nationalist agenda which eventually became the majority and is now utterly hegemonic.

Labor may continue to exist - for now, that is uncertain. In withdrawing from the coalition various party leaders argued that this has created a new opportunity to rebuild the party. Others, including from within the bloc of the eight remaining Labor MKs, have already started to eulogize the party and some may about to jump ship to Kadima. The internal rivalries, the network of divided and demoralized local party branches, the thoroughly tarnished image and the large financial debt are just some of the reasons for hedging against any real revival of Labor's fortunes anytime soon. The main hope, as ever, is that a charismatic leader would appear and magically transform the party.

While part of today's story was the witnessing of yet another petty political maneuver, one in a long series, from another perspective the meaning of today goes far deeper. First, if Israel is to be a functioning liberal democracy long into the future, one that is in any way recognizable to its supporters in the West (who are not religiously-oriented), then a new progressive camp will ultimately have to build itself. That camp will not emerge from the Knesset machinations of factions within factions of a party. It would have to be part of a longer process that thoroughly examines Labor's failings and that creates a new and progressive democratic story of Israel and Israel's future.

Outside of parliament, that progressive democratic camp is beginning to take shape. 20,000 demonstrated in Tel Aviv this past Saturday night against the McCarthyite interrogation of human rights NGOs just initiated by the Knesset. Crucially this camp will have to take an egalitarian approach and be integrally made up of both Jewish and Palestinian Israelis (Labor failed in that mission long ago). It will not be competing for political power anytime soon but it is crucial for Israel that it be part of the political debate.

Second, a parliamentary democracy like Israel's, especially in a country without a constitution, can only exist if there are strong party structures and a sufficient democratic consensus on how the country is governed. Both are under threat, and Ehud Barak today, in what was perhaps his political swansong, chose to further undermine an already fragile Israeli democracy. By any standards, Barak's act was a deeply undemocratic act. The very phenomenon of military generals going straight into politics, the story of Ehud Barak, is a problematic one. The inability to sustain democratically functioning party political structures which citizens are intimately involved in would be devastating for Israel. Many of Israel's parties are religious or strongman fiefdoms, and the traditional parties of the center have either not yet established proper procedures (Kadima), seen those procedures eroded (Likud), or simply collapsed (Labor). Israel's parliamentary democracy cannot survive if representative party political structures fall by the wayside.

Third, the immediate and fundamental questions facing Israel's future will be, as described above, decided in a fight between competing versions of the Jabotinskyite tradition (Ze'ev Jabotinsky was the founder of Revisionist Zionism, the forerunner to the Likud Party). Jabotinsky was a territorial maximalist in his time and committed to the role of force and power in achieving the goals of Jewish nationalism. But he also was in many ways a pragmatic realist and actually a liberal when it came to equality for Arabs. Israel is facing a choice between a fascist mutation of Jabontinskyism and a liberal mutation of Jabotinskyism, and with Labor dead, it is a Likud family affair.

Daniel Levy directs the Middle East Task Force at the New America Foundation and is an editor of the Middle East Channel.