Donald Macintyre: This is the end of Likud as a force on the hard right

It is a supreme historic irony that Ariel Sharon, in a coma in the Hadassah Hospital, does not - and may never - know that his decision to leave Likud, the party he helped to form a generation ago, was vindicated by the Israeli electorate last night. Unless last night's exit polls are spectacularly wrong, his new breakaway party will now lead and form a coalition which will take Israel into what last night became for its own domestic politics - and quite possibly for the wider Middle East - a new era.

In particular this is the end of Likud as the formidable force which has dominated Israel from the hard right - including when it was not actually in power - for so much of the past 30 years. The party that Mr Sharon deserted so spectacularly five months ago could grow again; Kadima, which has done less well, by several seats, than its leader, Ehud Olmert, had hoped, could even prove the one-election bubble that many have predicted.

But for all Mr Netanyahu's brave - in the face of this humiliation some might say hubristic - words about rebuilding the party last night, it is hard to envisage Likud returning to its former power without abandoning the ideology that has sustained it for a generation and without finally recognising, as Mr Sharon did, that maintaining a Jewish state while ruling over all the Palestinian territory seized in 1967 is not, in the end sustainable.

In the immediate aftermath of Ariel Sharon's stroke there was much speculation that Kadima would simply implode in the absence of the one man for whom it has seemed to be an exclusive vehicle. For all its showing is less than the polls predicted, this didn't happen. And what last night's vote decisively underlines is that in forming the party Mr Sharon was actually following public opinion as much as he was creating it. Kadima's objectives are limited: unilateral withdrawal from parts of the West Bank while annexing others; its vision - at least so far - a relatively bleak one of putting a physical and psychological barrier between Israel and as many Palestinians as possible.

Nevertheless five years ago Mr Olmert's clear statement that he intended to uproot more Jewish West Bank settlements would have been an unthinkable gamble; in this election it was an educated one, also vindicated by last night's exit polls. For if disengagement from Gaza last August proved anything, it was that that public opinion was shifting in favour of ending what a larger and larger number of Israelis are at last prepared to call the occupation.

That is reflected in the underlying message of last night's figures, which the discouraging success of a party many Israelis and almost all Palestinians see as close to fascist, Avigdor Lieberman's Yisrael Beiteinu, cannot disguise: the shrinking, overall, of the hard right in Israeli politics. The vote for parties which outright oppose the removal of settlements from occupied territory under any circumstances have dropped from around 40 to around 30 Knesset seats, if the exit polls are right.

Those who actively approve such withdrawals have delivered anything up to 66 seats. Since 22 of them are Labour's, Mr Olmert must surely now turn to the left to form a coalition if he is serious about pushing through his plan. To turn to Mr Lieberman and the right - for example because of reluctance to allot Labour key ministerial portfolios - would be to betray everything he has been saying over the past three weeks. Mr Olmert has indicated he plans to negotiate the new borders with the US rather than with the Palestinians. The trend in Israeli public opinion exhibited last night is a process, not a fait accompli; but that reinforces the argument that the international community and the US in particular would be missing a critical opportunity if they do not seek to capitalise on it to push the Olmert plan closer to one which might finally coax the parties towards a lasting peace.