"Prime Minister Ariel Sharon formed a three-party coalition in January 2005 to secure support for withdrawing from the Gaza Strip and four small settlements in the West Bank. In November, however, new Labor party leader Amir Peretz withdrew his party from the government and called for early elections. Sharon then resigned from the Likud party to form a new party, Kadima. On January 4, 2006, Sharon suffered an incapacitating stroke; Deputy Prime Minister Ehud Olmert succeeded Sharon. Kadima placed first in the March 28, 2006, Knesset (parliament) election, and Olmert has formed a four-party coalition government. Israel has an advanced industrial, market economy in which the government plays a substantial role. The economy is now doing very well, and increased social spending is expected. Israel's foreign policy is focused largely on its region, Europe, and the United States. The government views Iran as an existential threat due to its nuclear ambitions and support for anti-Israel terrorists. Israel negotiated a series of agreements with the Palestinians in the 1990s, but the Oslo peace process ended in 2000, after the beginning of the intifadah or uprising against Israeli occupation. Israeli and Palestinian officials resumed contacts after the November 2004 death of Yasir Arafat."
CRS Issue Brief for Congress, IB82008