Yesterday’s political bombshell, for obvious reasons, has left both citizens and commentators dumbfounded. It has been pointed out that Netanyahu is now the undisputed king of Israeli politics: basically no single coalition party has any real power over him; each and every one of them now knows that Netanyahu can live without them.

Of course Netanyahu and Mofaz explained why they went for this move only because of the greater good, and of course most Israelis don’t believe them, because the political interests are too clear. After all this is said, and the winners and losers of this development have been named, we should have a dry look at Israel’s new situation: what can we expect, and what are the major decision points of Netanyahu’s new coalition?

Both Israel’s domestic and the international press focus on Iran. Israeli commentators tend to emphasize that the wall-to-wall coalition provides Netanyahu with more bargaining power, whereas the international press hopes that Mofaz brings a more cautious position on military intervention into the government.

To my mind the most interesting factor is one that has been mentioned only rarely: the new coalition agreement’s commitment to resuming negotiations with the Palestinians. As we know from former Shin Bet Chief Yuval Diskin (and many of us thought all along), Netanyahu rather than Abbas refused to negotiate. So far he had little room to do so, as he was at the mercy of his right-wing coalition partners - and he always indicated that this was the reason he made sure nothing happened.

I have never thought that this was the only reason for Netanyahu’s stalling any movement on the Palestinian front: he has never believed that it is in Israel’s interest to allow a viable Palestinian state to emerge. Whatever the truth may be, the excuse that his coalition prevents him from moving ahead on the Palestine front is no longer valid: with Kadima’s 28 MKs in his coalition, Netanyahu no longer depends on either Shas or Lieberman’s Yisrael Beitenu.

Netanyahu’s new coalition partner Mofaz, for quite some time, has advocated a two-phased peace plan. He proposes to immediately establish a Palestinian state on 60 percent of the West Bank, thus liberating more than 99 percent of Palestinians from Israeli rule. This would create favorable conditions for final status negotiations.

Mofaz’s plan would require dismantling a number of settlement outposts placed in the 60 percent to be ruled by Palestinians. Implementing the Mofaz plan means to put an end to the dream of the greater land of Israel; it would make a Palestinian state a fact, and the question would only be, how the final borders will look.

Hence, in the next eighteen months, Netanyahu’s moment of truth will come: So far Netanyahu’s commitment to the two-state solution in his 2009 Bar-Ilan speech has been nothing but lip-service. He has consistently avoided confrontation with the settlers and with the large faction in his party that continues to believe in the greater land of Israel.

If Mofaz puts his plan on the new government’s table, Netanyahu will either have to make a decisive step towards ending Israel’s occupation of the West Bank and the century old conflict with the Palestinians, or go down in history as the man who destroyed any option for doing so.

A lot of ink has been spilled on the question whether his father’s death will give Netanyahu more freedom to act creatively. I am afraid that this is not the only factor: Netanyahu has a characterological distaste for grand moves. As tactician supreme, he feels safe, and his latest maneuver’s success might strengthen his resolve to continue playing for time without making real decisions. His distaste for risk-taking, no less than his father’s Manichean worldview, will determine the road he will take.

If Netanyahu chooses to move ahead with something like the Mofaz plan, Mahmoud Abbas’ moment of truth for will come, because it will not be easy for him to take this road. Palestinians are afraid that if in any multi-phased process, the intermediary stage of a Palestinian state on 60 percent of the West Bank might turn into the final status. Given that the occupation has been in place for forty five years, these suspicions are more than understandable. As a result, Abbas might opt to refuse cooperation on the basis of the Mofaz plan, and demand that the final status agreement needs to be reached first.

This, I believe, would be a historical mistake. Abbas must realize that Israelis need at least a decade of peace on the Palestinian front to accept the idea that Palestine will reach the 1967 borders, and put Israel’s population centers within striking distance of Katyusha rockets. Mofaz’s plan could provide the physical and political conditions for such a decade of peace; it would make Palestinian lives immeasurably better, while safeguarding Israel’s security.

Establishing a Palestinian state with temporary borders would decisively undermine rejectionists on both sides: it would make clear to Israel’s ideological right that its dream has come to an end. If indeed a new reality on the ground would give Palestinians more freedom and dignity, this would strengthen Abbas: it would show Palestinians that there is a political horizon, and that they have only to loose from endorsing Hamas rejectionist line. This, in turn, would force Hamas within a few years to change its political program, and to accept Israel’s existence.

Abbas should therefore engage with the Mofaz plan if it is put on the table. I am completely aware that this will be very difficult for him: he will be accused by his foes to sell out his people’s interest; he will be called a collaborator with the enemy. He will have to use all his political acumen and the leadership status he achieved during the last years to convince his people that this is the only way of establishing a Palestinian state on the ground, and that, in the long run, Palestinians will only gain from this.