The results of the exit polls have been announced and the situation is as follows. Kadima is projected to get about 30 seats and the Likud about 28 seats. Lieberman is in the area of 14-15 and Labor in the area of 13. Both Bayit Yehudi and Ichud Leumi seem to have gotten in, though barely. One of the two Arab parties might not get in. Overall, the right bloc is in the area of 63-64 seats.

So what will happen? First, the dry legal facts. the president must consult with the various parties and then make a determination which party has the best chance to form a coalition. That party gets the first chance to try. By all accounts, Likud has the best chance to form a coalition, but Peres is strongly tied to Kadima and might choose to give them the first shot.

So how will it play out? It's pretty straightforward. This is a bargaining game between Likud and Kadima. The most obvious coalition is one that includes both of them. The question is which gets to form the government and which joins it. The fact that Kadima is projected to be a bit larger (this is likely to change) seems like a key point in its favor, but in fact is not. The crucial issue in a bargaining game is the "disagreement point". The disagreement point is the result that ensues when the two sides fail to reach agreement. In this case, failing agreement, Likud has a plausible right-wing government, but Kadima has no plausible government. As a result, Likud has the upper hand in the negotiation with Kadima.

Several fine points should be noted. First of all, put yourself in Lieberman's position or in Shas's position. Given the fact that if Likud goes with Kadima, the negotiating position of these parties is reduced to close to zero, they have a very strong incentive to prefer a narrow government. This puts Likud in a strong position vis-a-vis them . For that reason, I predict that by tomorrow, we'll be seeing all these parties declaring their undying loyalty to a narrow Likud government. Second, from Likud's point of view, it would be better for Peres to give Kadima the first shot at forming a government. This is because once they fail to do so (and they will fail, if given the chance), Likud's advantage (the disagreement point) will be that much more clear to both sides. (Of course, if what you really want is a narrow right coalition, it might be better to just get on with it, but it's quite clear that that is not what Bibi wants. He wants only to wield the threat of such a government, not to realize the threat.)

One detail. As of now, Ichud Leumi has three seats. This might change once all the votes, including soldiers, are counted. If it holds, it means that Michael Ben-Ari is not in. While MBA and I share many views, the fact is that, fairly or not, there is just no chance of Ichud Leumi sitting in any coalition so long as he is in the faction. Without him, a narrow right coalition is that much more plausible.

A final note. One thing that held fairly constant in the polls for months was that Likud + Lieberman were worth 44 seats. Right now, they are projected at 42. My guess is that we'll see that number creep up to 44 as the real results come in. In fact, it is not unlikely that Likud will end up with more seats than Kadima.

Update (Wed. morning): A few brief observations. 1) It's hard to imagine anybody who voted for Kadima watching Livni's "victory" speech and not feeling buyer's remorse. 2) It seems that all of Kadima's surplus over what was expected came from Labor and Meretz. The tentative total of 44 for the three parties combined is what was anticipated. The Old Left is officially dead. (But voters on the left at least have the good sense to rally around the candidate with the best chance. If only the right had as much sense.) 3) Bibi will be the next Prime Minister and nobody knows it better than Peres. (The right has 65 and that number can only go up with the soldier votes and the remainder agreements.) That's why he'll work behind the scenes to engineer a deal that will give them equal power. It must be avoided. 4) The dumbest thing the right-wing parties can do is announce that they intend to drive a hard bargain with Bibi. The less likely a right-wing coalition is, the stronger Kadima is vis-a-vis Likud. We'll find out pretty quickly which of these parties is headed by a mathematician and which is headed by a Rov. 5) The next government will be Likud - Kadima - Lieberman - BY - one other dati party.