* Upstart centrist party joins Netanyahu coalition
* Party leader, ex-TV presenter, gets finance portfolio
* Faces budget deficit reduction challenge
By Tova Cohen and Steven Scheer
TEL AVIV, March 15 A former TV anchor whose
upstart political party was the biggest surprise in Israel's
January election was named finance minister on Friday as a
coalition deal was signed, his spokesman said.
Yair Lapid's centrist Yesh Atid party, which champions
bread-and-butter issues of the Israeli middle-class, won 19 of
parliament's 120 seats, second after Prime Minister Benjamin
Netanyahu's right-wing Likud-Beiteinu alliance's 31 seats.
After nearly six weeks of negotiations, Yesh Atid agreed on
Thursday to join a Netanyahu-led government. The deal, and a
separate coalition pact with the far-right Bayit Yehudi (Jewish
Home) party, were signed on Friday.
Lapid, who will replace Yuval Steinitz once a new government
is sworn in, ran largely on a platform of easing financial
pressures on the middle class through the need to share the
burden - a rejection of privileges for ultra-Orthodox Jews.
The new minister faces a major fiscal challenge in trying to
reduce a budget deficit that reached 4.2 percent of gross
domestic product in 2012, double an initial target of 2 percent.
To meet a deficit target of 3 percent of GDP in 2013, the
government will need to cut 14 billion shekels ($3.8 billion) in
state spending and raise taxes by about 6 billion shekels, the
central bank has said.
Zach Herzog, head of international sales at brokerage Psagot
Securities, said Lapid will have to prove to markets that he can
manage fiscal policy.
"From what little can be gleaned about his economic views he
will be fairly in line with centrist-right economic policy,"
Herzog said. "He will make cuts in social services, child
benefits. That's part of the platform he ran on."
Despite a minimal knowledge of economics, Lapid will get the
benefit of the doubt from investors, at least at the outset.
"According to his agenda, he is on track to satisfy the
markets," said Eyal Klein, chief strategist at the IBI
Investment House and former manager of external debt at the
Lapid's success largely depends on how much backing he
receives from Netanyahu, himself a former finance minister who
favours the free market.
"We don't know what the working relationship will be between
the two but we know what needs to be done, which is a
substantial cutting of expenditures," Bank Leumi chief economist
Gil Bufman said.
After a long career in journalism, Lapid founded Yesh Atid -
Hebrew for 'there is a future' - in early 2012, capitalising on
growing public discontent at living costs and housing prices.
Hundreds of thousands of Israelis rallied in the summer of
2011, protests that were sparked by a jump in the price of
cottage cheese, an Israeli staple that became symbolic of the
wider price rises.
Ofra Strauss, chairwoman of foodmaker Strauss Group
- a main target of those protests - said Lapid faced a
tough challenge but could expect the support of business.
"Whoever will sit in this seat in the next four years will
have definitely a lot of turbulence," Strauss told Reuters.
"We heard in the last few years what everyone wants to
happen in this country ... all of us voted for change, for new
things, new direction, so I am sure the business sector will be
there for him."
In addition to the budget, a key issue for markets is
whether the government will allow Canadian fertiliser producer
Potash Corp to buy control of Israel Chemicals Ltd
, the world's sixth-largest potash maker, according to
Potash Corp seeks to raise its stake from 14 percent but
Israel's government has a golden share in ICL, giving it a veto
right on any takeover. Although Lapid will face populist
pressure against a sale of ICL, such a deal could be a huge tax