Avigdor Lieberman, who heads the right-wing Yisrael Beitenu party, has drawn accusations of racism for proposing that Israel’s Arab citizens sign loyalty oaths or lose their citizenship.
Although that plan is not likely to be implemented, his designation as foreign minister could harm Israel’s international ties.
The European Union urged Netanyahu to craft a government that embraces the goal of an independent Palestinian state living side by side with Israel — signalling that the appointment of Lieberman as foreign minister would be seen in Europe as a setback to Middle East peace efforts.
“Let me say very clearly that the way the European Union will relate to an [Israeli] government that is not committed to a two-state solution will be very, very different,” Javier Solana, the EU’s foreign and security affairs chief, said on Sunday.
Lieberman’s appointment to the post is not yet finalised, however.
Likud spokeswoman Dina Libster said the coalition agreement included a provision that both sides were prepared to form a government that would include moderate partners, such as the Kadima Party of the current foreign minister Tzipi Livni.
That wording leaves open the possibility that Livni might retain her current job if she were to join such an alliance.
Local media reported over the weekend that Netanyahu has resumed overtures to recruit Livni.
The agreement with Yisrael Beitenu is the first Netanyahu has initiated on his way toward setting up a coalition of hawkish and Orthodox Jewish parties.
The government taking shape would take a harder line on Palestinian and Arab issues than the outgoing administration of Prime Minister Ehud Olmert.