By Jeffrey Heller
JERUSALEM, Dec 10 (Reuters) - Benjamin Netanyahu could coast to victory in Israel’s election two months from now, opinion polls showed on Wednesday, and he plans to take a detour on what Palestinians had hoped would be a U.S.-paved road to statehood.
Economic proposals could yield dividends for the former prime minister and head of the right-wing Likud party -- tipped to take up to 36 seats in the 120-member legislature in the Feb. 10 ballot, more than enough to form a ruling coalition.
Netanyahu’s widely praised stint as finance minister in 2003 to 2005, when he pushed free market reforms that spurred growth, could translate into votes in a contest coinciding with the global downturn affecting Israel, his advisers believe.
Israelis will be asking: "Who can manage the Israeli economy in times of crisis?" one said.
But his strategists acknowledge that Palestinians are likely to be reluctant, at least publicly, to embrace a Netanyahu proposal to focus U.S.-led peace efforts on bolstering their frail economy rather than on a statehood deal any time soon.
The former front-runner in the Israeli electoral race, Foreign Minister Tzipi Livni of the centrist Kadima party, has been Israel’s chief negotiator in talks with the Palestinians that Washington had hoped would result in a deal this year.
Wide differences remain over issues at the core of the conflict such as the future of Jerusalem and the fate of Palestinian refugees.
Livni has also been wounded by her failure to clinch a coalition deal that many Israelis felt was within her grasp after Prime Minister Ehud Olmert of Kadima resigned in September amid corruption allegations.
Instead, Olmert is staying on until a new government is formed after the coming vote.
A political partnership with the ultra-Orthodox Shas party would have made Livni prime minister and helped her to avoid an election campaign now, when cross-border rocket fire from the Gaza Strip has raised security concerns that have traditionally turned Israelis to the right.
ROAD TO NOWHERE
A Netanyahu adviser said "Bibi" wants the United States, Israel and Palestinians "off a track that’s not going anywhere".
Instead, Netanyahu, 59, hopes to steer Barack Obama and Palestinian President Mahmoud Abbas towards a plan to build industrial zones in areas of the West Bank close to Israel.
"There will be three or four pockets where development is not dependent on the movement of people," the adviser said in a reference to Israeli military checkpoints in the occupied territory that have choked the Palestinian economy.
Netanyahu, the adviser said, believes his proposal can achieve 10 percent annual economic growth in the West Bank and that in any case, it would take the new U.S. administration up to two years before it is fully invested in the peace process.
For Netanyahu, changing gears in an internationally-backed drive towards a Palestinian state would fold nicely into his own policy road map, which includes -- although he does not say how -- ending the Islamist group Hamas’s control of the Gaza Strip.
As prime minister from 1996 to 1999, Netanyahu bent to Washington’s will and handed over parts of the West Bank city of Hebron to the Palestinian Authority, then led by Yasser Arafat.
But he supports Jewish settlement expansion, and, one adviser said, "he doesn’t want to be the first Jewish leader in 3,000 years to give up Jerusalem", which Palestinians also regard as their capital.
Netanyahu says a Palestinian state must have limited powers ensuring it is demilitarised and banned from making treaties with Israel’s enemies.
Ghassan Khatib, a former Palestinian cabinet minister, said Netanyahu’s economic-weighted programme "to fill Palestinian stomachs and avoid violence" was a recipe for disaster.
Writing on Bitterlemons.org, a Web site that focuses on the peace process, Khatib said: "There will be no end to the conflict without an end to occupation in a way that allows Palestinians to enjoy their natural rights of independence, self-determination and statehood."