Israel’s power-sharing government collapsed on Tuesday, only seven months after it was formed, putting Israel on course for its fourth elections in two years.

Why it matters: The government was formed by two rivals — Prime Minister Benjamin Netanyahu and Minister of Defense Benny Gantz — to end a political stalemate, but it was totally dysfunctional. Its collapse means Gantz will not rotate in as prime minister next November, as the two had agreed in their coalition deal.

Behind the scenes: With the deadline to pass a budget looming, Netanyahu and Gantz held secret negotiations over the past two weeks in an attempt to reach a deal.

• Gantz insisted that Netanyahu must agree to pass a budget for 2021 and legally lock in the rotation deal.
• In return, Netanyahu demanded that Gantz strip many powers from Justice Minister Avi Nissenkorn, a member of Gantz's party who turned into a bitter foe of Netanyahu's.
• Under the proposed deal, Netanyahu — who is on trial for corruption — would have significant influence over the appointments of the attorney general, state prosecutor and supreme court judges. All of those roles are very relevant to his legal situation. 

How it happened: Gantz was prepared to accept many of Netanyahu's demands, but he faced a rebellion in his party once the proposal was exposed in the press. Nissenkorn even threatened to split the party if Gantz took the deal. 

• The proposal also infuriated Gantz's political base. He faced mass protests outside of his home and abuse on social media.
• Those protests were further inflamed when it was revealed that the man negotiating on Gantz's behalf was Haim Ramon, a former government minister with a sexual misconduct conviction and a reputation as a vocal Netanyahu defender
• Under pressure, Gantz backed away from the deal and denied that he was ever going to allow Netanyahu to have any influence on the legal system.

Yes, but: Until Monday night, he was still trying to pass a law that will buy more time for negotiations with Netanyahu. 

• When that law came up for a vote, several members of Gantz's party joined the opposition in voting against the bill and in favor of early elections.
• On Tuesday at midnight local time (5pm ET) the budget deadline passed and the Knesset was dissolved.

The big picture: The government collapse comes amid a dramatic deterioration in Gantz’s political standing and a decline in Netanyahu’s favorability. It also follows the establishment of a new right-wing party headed by a Netanyahu critic, Gideon Saar, which could change Israel’s political map.

What’s next: The elections will take place on Mar. 23.

• The latest polls show Gantz's party barely above the electoral threshold, with five seats. If that trend continues Gantz might drop out of the race. 
• Netanyahu will try to regain public support by focusing his campaign on the COVID-19 vaccine, Israel's recent normalization agreements with the Arab world, and his opposition to any new deal with Iran. 
• Saar is the political star of the moment. He will try to establish himself as the only alternative to Netanyahu in hopes of rallying a broad swathe of voters who want to see Netanyahu removed from office.

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