Israeli PM Benjamin Netanyahu shakes hands with Naftali Bennett, the head of the right-wing Jewish Home party, May 6.

TEL AVIV —  Israeli Prime Minister Benjamin Netanyahu signed an agreement Thursday giving a senior role to the far-right Jewish Home party, which firmly opposes a Palestinian state, hours after forging a new government.

“Israel now has a government,” Naftali Bennett, the head of Jewish Home party announced at parliament after hours of haggling with Netanyahu’s Likud deputies over cabinet positions.

Senior Palestinian official Hanan Ashrawi said Jewish Home “represents the most extreme and racist elements within Israeli society.”

Netanyahu had struggled to put together a coalition for nearly two months after winning an easy election victory, after a former ally abandoned him this week.

Barely two hours before a midnight deadline mandated by law, Netanyahu’s right-wing Likud sealed an agreement with ultranationalist Jewish Home on Wednesday.

Netanyahu dispatched a formal notice to President Reuven Rivlin, telling him “I am honored to notify you I have succeeded in forming a government, which I would like to present to parliament as soon as possible.”

With Jewish Home, the ultra-Orthodox United Torah Judaism and Shas parties and Kulanu, a centrist faction, the Likud-led government will control 61 of parliament’s 120 seats.

Such a narrow majority will make Netanyahu vulnerable to policy demands from even his most junior partners, continuing a long tradition of instability in Israeli politics.

Netanyahu said he would seek to enlarge the coalition. “Sixty-one is a good number, 61-plus is better,” he said, without elaborating as to which party he would seek to add.

Jewish Home seems certain to push for the expansion of Jewish settlement in occupied territory, a policy that could deepen Israel’s rift over the issue with its main ally, the United States, and the European Union.

Bennett, the party’s leader, is a strong supporter of a bill, promoted by Netanyahu, that would anchor in law the status of Israel as the nation-state of the Jewish people. 

Other proposed legislation likely to be pursued would seek to limit the power of the Supreme Court to overturn laws passed by parliament and tighten controls over foreign donations to left-wing organisations.

Shortly after the March 17 election, Netanyahu appeared to be coasting toward a right-leaning government with control of 67 parliamentary seats and voiced confidence he would be able to form one quickly. Rivlin initially gave him 28 days to do so.

But on Monday, Foreign Minister Avigdor Lieberman, whose once-strong relationship with the Israeli leader turned sour long ago, took his far-right Yisrael Beitenu party out of the coalition talks.

That left Netanyahu with only 53 seats, making Jewish Home’s backing essential to ensuring the unexpected election win would result in a fourth term for the 65-year-old leader.

Had Netanyahu not met Wednesday’s deadline, the president would have been obligated by law to appoint another legislator to try to form a government.

President Obama, who has had a testy relationship with the Israeli premier, said in a businesslike statement that he “looks forward to working” with Netanyahu’s new government.

As the new government took shape, Israel gave the green light for construction of another 900 new homes in Ramat Shlomo, a settlement neighbourhood in east Jerusalem, the Peace Now watchdog said.

The Palestinians denounced the new government, with chief negotiator Saeb Erakat saying it was clear it would not be working for peace and would seek to expand settlements.

This coalition “will be one of war which will be against peace and stability in our region,” he said.

“This government will set its sights on killing and reinforcing settlement activities,” he said of Israeli construction on land the Palestinians want for a future state.