Kadima ekes out narrow win over Likud. Now the hard part.

With 99.7 percent of the votes counted, Kadima was narrowly leading Likud with a predicted 28 mandates, while the latter had garnered a predicted 27 seats. Israel Beiteinu was expected to earn 15 mandates, Labor 13, Shas 11, United Arab List four, United Torah Judaism five, National Union four, Hadash four, Meretz three, Bayit Hayehudi three, and Balad three.

Overall voter turnout, which observers had feared would be low, was 65.2%, over two percentage points higher than in the 2006 national elections.

Livni had argued earlier in the day that whoever headed the biggest party should be deemed to have "won the public's trust" and should thus be charged with forming the next coalition.

But Likud leaders were already working on Tuesday to construct a "blocking" majority that would deny her any such prospect.

Israel Beiteinu, whose support could be critical to the nature of the next coalition, was to meet on Wednesday to discuss the options produced by the election outcome. But party leader Avigdor Lieberman, in a victory speech after midnight, indicated it was his intention to go with the Likud.

In the immediate aftermath of the election, many things are said that won't necessarily be true in 2 weeks or 2 days or perhaps even 2 hours. The Grand Bargaining Game is afoot and both Livni and Bibi have their work cut out for them.

On my radio show last night, Professor Barry Rubin, Director of the GLORIA Center and a keen observer of Israeli politics noted that the most favorable outcome would be a "Unity Government" where Kadima and Likud would join with the other two larger parties - Labor and perhaps Israel Beiteinu in order to form a very stable government.

Rubin pointed out that the problem for both leaders is that if they try to form a coalition without the other by inviting several of the smaller parties into the government, their majority would be shaky at best. This is especially true of Netanyahu who may try make an alliance with Mr. Leiberman and 4 of the small conservative religious parties that would, in fact, give him a bare majority in the 120 seat Knesset. But it would also give those smaller parties a lot of influence because if any one of them were to pull out in a spat over expanding settlements, for example, the Likud-led government could fall.

Rubin believes that in the end, both leaders will see the light and work out an agreement that would give Israel a stable, majority in the Knesset.

Considering the challenges facing the Jewish state in the coming months and years with a new Administration in Washington, new realities in the Middle East, and the specter of a nuclear Iran, such a Unity Government would be welcome, indeed.