Donald Macintyre: With friends like Avigdor Lieberman...

Those puzzling in Britain on how far public disagreement should be allowed between members of a coalition Cabinet may like to consider the case of the Israeli Foreign Minister, Avigdor Lieberman. In Israel, where, unlike in Britain, coalition has always been the norm, the stiff-upper-lip concept of collective responsibility has never been a big deal. Disputes are out in the open, and often remain so after the decision in question has been taken. Yet even by these relatively lax standards Mr Lieberman has boldly gone where few, if any, ministers have gone before.

Mr Lieberman is after all supposed to be the leading spokesman for the government abroad and might therefore be thought to have a special responsibility to express government policy. In September, however, at the UN General Assembly in New York, he made a speech diametrically opposing the position of Prime Minister Netanyahu (or at least the public one), that it was possible to reach a peace agreement with the Palestinians within a year. Mr Lieberman said that even an "intermediate" deal could take decades, and went on to expound his own highly personal – and, to many, toxic – proposal for "static transfer" by locating the most populous Israeli Arab area in a distantly future Palestine.

Then this week, he did it again. Just as efforts, undoubtedly in Israel's strategic interest, were being made to patch up relations with Turkey that had gone into deep freeze after Israel's lethal raid on the Gaza-bound vessel Mavi Marmara, Mr Lieberman chose to denounce the Turkish leadership for their "lies", going on to reaffirm his opposition to reaching an agreement with the "illegitimate" moderate Palestinian leadership in Ramallah. The Israeli Foreign Minister, in other words, has made a mockery of Lyndon Johnson's famous remark about why it was better to keep J Edgar Hoover on at the FBI. Mr Lieberman is inside the tent. And he is pissing in as well as out.

What is surprising is not Mr Lieberman's views on these topics but Mr Netanyahu's seemingly inexhaustible tolerance for his expression of them. It can be debated whether an ultra-nationalist who fought the last election on a proposal to force Israeli Arabs to swear allegiance to the Jewish state in order to qualify for citizenship, and who once said that Arab parliamentarians who talked to Hamas should be executed, could ever become the Israeli Prime Minister. But one point on which both men seem agreed – and they are not alone – is that Mr Lieberman remains Mr Netanyahu's most dangerous rival on the right. And Mr Netanyahu has apparently decided, for now at least, that his Foreign Minister is marginally less threatening inside his coalition than out of it.

Mr Netanyahu's refusal to sack his Foreign Minister has therefore been widely read in Israel as growing weakness. And it is made the more inevitable by the lack of an alternative agenda, especially in relation to the Palestinians, that Mr Netanyahu can stand on. It isn't easy to sack a minister as powerful as Mr Lieberman for deriding the peace process if there is no peace process to speak of. 2010 was the year in which even the most hardened sceptics struggled to suspend their disbelief, and will the Prime Minister to feel the hand of history on his shoulders. On the old Nixon-recognises-Red China principle, it was argued, only the right can make a lasting peace; Netanyahu wouldn't want his second premiership to end in failure as the first one did. And so on. At the turn of the year, these panglossian sentiments are becoming harder and harder to utter with any credibility.

The Americans cannot escape blame for squandering 18 months of diplomatic capital on an ultimately vain effort to persuade Mr Netanyahu to sustain the settlement freeze without which the Palestinians said they would not negotiate.

It still seems incredible that the Obama administration allowed the agreement on a resumption of the freeze which Mr Netanyahu was supposed to have struck over seven hours of talks with Hillary Clinton in mid-November to be unravelled within days by his right-wing coalition partners. In his television interview this week, moreover, Mr Netanyahu blandly blamed the Palestinians for being "unwilling to make peace" and suggested Israelis now focus instead on their country's economic strength.

That approach would be fine if not for the fact that Israel is massively the stronger party, that the Palestinians had by all accounts agreed to the original Clinton-Netanyahu terms, and above all if political progress were not centrally an Israeli interest as well as a Palestinian one.

This point was dramatised this week when the veteran Labour minister Benjamin Ben Eliezer urged his colleagues "to do everything possible" to get negotiations restarted, adding: "I wouldn't be surprised if within one year the whole world supports a Palestinian state, including the United States. Then we'll ask where we were and what we were doing."

He spoke in a context in which the Palestinians are resorting to a diplomatic Plan B, securing "recognition" of a Palestinian state on 1967 borders by Latin American countries, and now promoting a UN resolution condemning settlements. These moves will not end the occupation; and the US may well veto such a resolution. But the reason that they have any traction at all is the very one that should be propelling Israel back to negotiations at virtually any short-term price, that there will never be a more secure neighbour than the state-in-waiting that the Palestinian Prime Minister, Salam Fayyad, intends to have built by the late summer of 2011.

The international efforts to resume negotiations will continue. Rather as the Northern Ireland peace process diverted round the road block of IRA arms decommissioning a decade ago, so the US-led mediators will now try to find significant confidence-building measures other than a settlement freeze that they can persuade Israel to agree as an incentive to talks. And some of the Europeans, irritated at being allocated by Washington the servile task of "selling" to the Palestinians proposals for getting back into talks that they did not devise, may seek a more creative role next year.

The problem is that Israeli politics has not stood still in the past 18 months. In a column starkly headlined "It's over" the Haaretz commentator Aluf Benn this week depicted an agenda-less Prime Minister who could have built a broader coalition but for whom it was now "all downhill until the next elections". He argued that the West would do well to concentrate its efforts on preventing the "military escalation" – whether from a strike on Iran or a fresh war in Gaza – to which he pointed out Israel is especially prone in the run-up to elections.

With a strengthened Mr Lieberman – who once exhorted his colleagues to treat Gaza as "Russia operates in Chechnya" – waiting in the wings, it's isn't impossible that Mr Netanyahu would be tempted catastrophically into Gaza, as Ehud Olmert was tempted so bloodily in an election year when Mr Netanyahu himself was similarly waiting in the wings. But either way, the momentum towards a Middle East breakthrough that seemed possible when Barack Obama was elected two years ago is at once more necessary and much harder to generate than it was then.

d.macintyre@independent.co.uk