After Acting Prime Minister Ehud Olmert declared election victory early Wednesday, his confidants said Shas and the Pensioners' Party would be partners in the new government. During the course of the day Wednesday, Kadima will set up its negotiating team and begin working to create Israel's next ruling coalition.

The statement by Olmert's associates appears to be the reflection of results in which Kadima won far fewer seats than it had hoped and in which Shas and the Pensioners' Party garnered more than expected.

Kadima member Haim Ramon said Wednesday morning he expects the new government to be presented immediately after the Passover holiday.

Speaking to Israel Radio, Ramon said Kadima will be able to implement a withdrawal from the West Bank with the support of between 70 and 80 Knesset members. He added the Labor Party would be "a possible central partner" in the coalition and emphasized "social issues will not be a hindrance in coalition negotiations."

With 99.5 percent of the vote counted, Kadima had a less than expected 28 seats. Labor held at 20 seats, and Shas rose to 13, making the Sephardi ultra-Orthodox party the third largest faction in the Knesset.

As of Wednesday morning, election observers had yet to count the votes of Israel Defense Forces soldiers, Israeli diplomats abroad, hospitalized patients, incarcerated citizens and Israeli mariners. Their votes could alter the final results slightly.

The Likud had hoped to block a center-left coalition, but with almost all of the votes in weakened to 11 seats, far below the figures the party had hoped and a far cry from the 38 seats it won under Ariel Sharon in 2003.

Avigdor Lieberman's Russian immigrant-dominated faction Yisrael Beiteinu captured 12 seats, positioning itself as the chief opposition party to head the nationalist camp.

In the largest surprise of the night, the Pensioners' Party won seven seats. The right-wing National Union-National Religious Party secured nine seats, with United Torah Judaism at six and Meretz at four. The Arab parties won a total of ten seats.

Exit polls released as polling stations closed at 10 P.M. Tuesday showed center-left parties gaining a total of between 62 and 66 seats, with Acting Prime Minister Ehud Olmert's Kadima winning 29 to 32 seats, Labor 20-22 seats, Meretz five and the Arab parties seven to eight seats.

Lowest voter turnout in history
The total voter turnout was 63.2 percent, by far the lowest percentage in Israel's history. The previous low was notched in 2003, when 68 percent of eligible voters cast their ballots.

While the results pointed to a new government headed by Olmert, he would likely seek additional partners to broaden his coalition and shore up support for such policy moves as a further withdrawal in the West Bank.

Netanyahu: Sharon left us a shattered movement
Kadima, which had slipped in polls in recent weeks, was jubilant over the results, as were Labor Party officials.

"Kadima has won today. The next prime minister is Ehud Olmert," said Kadima MK Roni Bar-On, who, like Olmert and a host of other senior political figures, had followed Sharon out of the Likud to found a new centrist party.

Labor Party candidates said their party had won a victory as well, apparently exceeding the predictions of recent opinion surveys.

"I am quite satisfied. This party is now considered a serious party, and this is a success story tonight," said Collette Avital, a senior Labor Party member.

There was dejection in the Likud camp, which had difficulty regrouping after the party split late last year into rival factions headed by Sharon and Benjamin Netanyahu.

"Although the actual results have yet to arrive, we have no doubt that the Likud has sustained a heavy blow," Netanyahu told party activists.

In a direct swipe at Sharon, Netanyahu said the party had already been hard hit when "the former head of the party left it - and left us - a broken, shattered movement."

Netanyahu said he would stay on as party chairman. "We intend to continue along the path we have only just begun in order to ensure this movement is rehabilitated and takes its rightful place in the nation's leadership," he told reporters.

Just before Netanyahu spoke, a buoyed Lieberman told well-wishers that he had no doubt that in the next election, Yisrael Beiteinu would become Israel's ruling party.

Rafi Eitan, leader of the Pensioners party, turned aside questions as to the faction's positions on matters of state. But he was forthright on the goals the party has set for itself, safeguarding the future of senior citizens. "We'll achieve our goals within one year," he said.

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By Haaretz Service