The coming elections have exposed a new schism among Israelis. Beyond Left-Right and Orthodox-secular, Israelis are now divided over whether they are more anxious about external threats or domestic crises.

For the first time, the Labor Party has effectively ceded foreign policy to the Likud and is running on a domestic-driven agenda. It is an astonishing moment in Israel’s political history. The party that founded the state and then governed uncontested for three decades, defining Israel’s security doctrine in its formative years, has little to say about a nuclear Iran, the rise of Hamas and Hezbollah on Israel’s borders, the Muslim Brotherhood takeover of Egypt, the Palestinian stalemate. At one of the most dangerous moments in Israel’s history, the Labor Party has refashioned itself into a European-style social democratic party, primarily concerned with cost of living and wage gaps.

Yet Labor’s retreat from the Palestinian issue reflects a healthy realization, from the party responsible for the Oslo process, of the limits of Israeli concessions to influence Arab rejectionism. Implicitly conceding that Israel lacks a credible partner for a final-status agreement, Labor has aligned itself with the Israeli consensus, which supports a two-state solution but doubts its implementation anytime soon.

And so, like most Israelis, Labor has moved on, contending with internal problems that are within Israel’s control.

Labor’s reinvention of itself from peace party to social welfare party has enabled its comeback – if not yet as a credible party of government, then at least as the leading party in opposition.

Yair Lapid’s new party, Yesh Atid (There Is a Future), is also emphasizing a domestic agenda. When Lapid ventures into foreign policy he conveys confusion: He recently condemned Labor leader Shelly Yacimovich for asserting that, until a peace agreement with the Palestinians is signed, the government has a responsibility to continue subsidizing settlements; yet he publicly launched his campaign from the settlement of Ariel, affirming the settlers’ place in mainstream Israel.

Lapid recovers his clarity when addressing domestic issues, especially the problem of the relationship of the ultra-Orthodox to the state. Though the widespread assumption was that Lapid – whose late father, Tommy, headed the anti-ultra- Orthodox party, Shinui – would likewise create a blatantly secular party, Yesh Atid is far more nuanced. Its candidates list offers a compelling vision of a pluralistic, culturally centrist Israel. Among its candidates are not one but two Orthodox rabbis – Shai Porat, a religious Zionist, and the ultra-Orthodox Dov Lipman – both committed to a democratic Israel and to an equal sharing of the security burden. And then there is Ruth Calderon, a founder of the movement among secular Israelis to create their own forms of Judaism. Finally, the list boasts two Ethiopian candidates.

(Other parties absolve themselves by including one Ethiopian.) Among opposition parties, only Tzipi Livni’s “The Movement” has placed the moribund peace process at the center of its campaign. That move reflects Livni’s uncanny ability to misread political reality.

Few Israelis find credible Livni’s insistence that she can deliver an agreement with Palestinian leader Mahmoud Abbas.

If so, Israelis ask, why didn’t the Olmert government, in which Livni served as foreign minister, bring peace? Conditions today are hardly more auspicious for an agreement with the Palestinians, who are divided into two rival authorities and who show no intention of abandoning the demand for refugee return to the State of Israel, the main obstacle in the past to an agreement.

The turn toward a domestic-driven politics isn’t only a function of the failure of the peace process and the growing despair among Israelis about the future of the Middle East. It is also a positive impulse, a longing to free the political system from its preoccupation with security and to finally begin confronting the deep distortions in Israeli society.

The longing for a politics of normalcy – motivated by economic and social rather than existential concerns – was the driving force behind the social protest movement in the summer of 2011, the first massive and sustained domestic protests in Israel’s history.

Tellingly, though, those protests abruptly ended when rocket attacks resumed from the south. The protest movement never recovered.

In the year and half since then, the region around us has become increasingly menacing. The dream of an Arab version of Berlin 1989 has devolved into an Arab version of Tehran 1979. Perhaps at no time since May 1967 has Israel felt so besieged.

And with tens of thousands of rockets aimed at Israeli cities and towns, the danger may be even more acute than it was then.

Ironically, then, the rise of a domestic agenda could not have come at a worse possible moment. One reason the Right will win the coming election is because, at a time of instability and threat, Israelis want a leadership focused on security.

But for all its predictability, this election has already produced one surprise: a plethora of talented new politicians. They include former social protest leaders, moderate Orthodox Jews, even disaffected ultra-Orthodox rabbis. (Along with Yesh Atid’s Lipman, there is Rabbi Haim Amsalem, who defected from the ultra- Orthodox Shas party and is running on his own list, demanding that yeshiva students enter the work force and the military.)

Another noteworthy addition to the political system is Maj.-Gen. (res.) Elazar Stern, the IDF’s first Orthodox major-general. Stern may also be the first retired general to enter Israeli politics with a domestic, rather than a security, agenda.

Stern is running on his “civilian” achievements in the army, such as instituting conversion classes for Russian immigrant soldiers that circumvented the rigid requirements of the rabbinic establishment. And he is intent on combating the extremist and isolationist stream within religious Zionism – just as he did in the army, when he led a campaign to ensure that Orthodox soldiers obey orders during the IDF’s evacuation of Gaza settlements in 2005. (The fact that is he is running on Tzipi Livni’s list is a political quirk. “The Movement” will likely meet the same fate as Livni’s failed former party, Kadima.)

The “domestic” parties generally lack candidates with weighty foreign policy credentials and are not yet ready to lead the country. But as the next generation of leaders creates a new political agenda, this election is creating hope for long-term change.

Yossi Klein Halevi is a senior fellow of the iEngage Project – iengage.org.il – at the Shalom Hartman Institute and a contributing editor of The New Republic.

Please LIKE our Facebook page - it makes us stronger