The surprise victory of Histadrut labor federation chairman Amir Peretz over VPM Shimon Peres in the Labor Party primaries this morning puts an end to speculation as to whether or not Israel will have early general elections.

There will be.

It is far from clear, however, how this election will play out.

Will Peretz succeed in making economics the dominant issue of the campaign?

One can certainly argue with Peretz's socialist economic views - a clear preference to re-divide rather than enlarge the economic pie - but one cannot ignore that he enters the arena with the advantage of having a very clear economic philosophy and the ability to communicate it to the voters.

Binyamin Netanyahu's certainly has a clear economic philosophy, and he has demonstrated as treasury minister that it works in practice . But there is a large population of voters who may not have the patience to wait for the benefits of the expanding economic pie Netanyahu promises to benefit them and would prefer Peretz's promise to give them a bigger slice of the existing pie today.

On the other hand, if the issue remains "guns" rather than "butter", Peretz is at a considerable disadvantage in light of his lack of any background in either defense or foreign affairs as well as his leftist views.

Netanyahu's identification with an economic policy that is the polar opposite to Peretz may put him at a disadvantage over alternative Likud candidates since others can more credibly adopt some of Peretz's demands (for example increasing the minimum wage to a livable wage, increasing transfer payments to the poor elderly, etc.) to knock much of the wind out of his sails so that the "guns" remain the decisive issues in the campaign.

And what of a break-away Sharon party?

It would certainly be tempting to try to put together a list of Likud and Labor personalities to take votes from both parties, but the gross failure of pollsters to predict the Peretz victory serves as a warning that political machinations driven by polling data are far from being a sure bet.

A Sharon party would also be, by its nature, totally dependent on the vote drawing ability of Ariel Sharon, and that is a function both of how Sharon's retreat plays out before the elections and Attorney General Mazuz.

Post retreat security arrangements are certainly considerably inferior to what the Sharon team anticipated and post-retreat Gaza is a source of ever increasing concerns, but it remains to be seen if the situation will reach a boiling point before or only after Israelis go to the polls.

If indicted, Sharon would not be able to serve as prime minister. Mazuz wasn't expected to allow the wheels of justice to interfere with the implementation of Sharon's retreat, but it was far from clear just how long this policy would continue. Reports in the press that Sharon intends to retreat to "final borders" if diplomacy fails may make concerns regarding the possibility that Mazuz might indict Sharon moot.

Will the advanced elections have an impact on Israel's willingness to make further concessions on security arrangement at the passages?

Will Washington try to strike a balance between its desire to help Abbas in the Palestinian elections (by pressing Israel to make security concessions) and an interest to avoid hurting Sharon's election prospects?

One thing is certain: Peretz's victory brings Israel considerably closer to finally providing its citizens with the opportunity to express their will for the first time since Mr. Sharon exploited his landslide anti-retreat election campaign victory to implement the very policy he opposed.

Copyright by Dr. Aaron Lerner, www.imra.org.il