Ehud Barak’s announcement Monday that he and four additional Labor MKs were breaking off from their party to form the “Independence” faction and remain in the coalition has left a once illustrious political party – indeed, the governing party for 29 of modern Israel’s first 30 years – in shambles.It has also strengthened Prime Minister Binyamin Netanyahu’s hand – by eliminating fears that all of Labor’s 13 MKs would leave the coalition in protest against the lack of headway being made in talks with the Palestinians – though the coalition, reduced to 66 members, is now unprecedentedly vulnerable to potential extortion by one or other of its constituent parties.Ex-commando Barak’s characteristically cunning and secretive action – which ensures he retains the defense portfolio, and which pre-empted an imminent move by Labor colleague-rivals to force the party out of the partnership with the Likud – leaves Labor in critical condition.Barak and the quartet who followed him may ultimately join the Likud. They may honor Barak’s pledge to form yet another centrist party. They may simply disappear in the next elections. The remaining Labor legislators might overcome their myriad personal differences and apparent lack of ideological coherence, refocus and become a potent opposition force. But they, too, might splinter into more factions and sub-factions like so much political detritus.Barak has been a divisive, haughty party chairman, but it was unfair of Labor veterans such as Uzi Baram and Moshe Shahal, as well as current Labor legislators like Eitan Cabel, to assert that he was personally responsible for “completely destroying” the party. Barak’s defection is a hammer blow, but it is also emblematic of a deeper ideological crisis on the Left, and not just in Israel.After the financial meltdown of 2008, there was a resurgence of socio-democratic economic policies to counter what was perceived as the shortcomings of unbridled capitalism. But the pendulum has quickly moved back, with the Tea Party’s gains in November’s US mid-terms and Britain’s Conservative and Liberal Democrat parties ousting Gordon Brown’s Labor. The push to slash expenditures on social welfare programs has swept Europe as well, as Spain, Portugal, Italy, Greece, Ireland and others grapple with ballooning debt.In Israel the neo-liberal economic policies implemented under Ariel Sharon’s government by then-finance minister Binyamin Netanyahu have proven themselves, helping Israel weather the financial storm while maintaining growth and relatively high employment levels. In the process, old socialist ideals once represented by Labor, which were unsuccessfully championed by former Histadrut head Amir Peretz, have been delegitimized.Barak’s conspicuous consumption, exemplified in his purchase of a multimillion dollar high-rise apartment in north Tel Aviv’s prestigious Akirov Towers, illustrates the ideological divide that distanced his Labor from the Mapai of David Ben-Gurion, who chose a modest house in the Negev’s Kibbutz Sde Boker when he was sent into political exile.But it is also a sign of the times, which makes talk of creating a new socio-democratic party that would bring together Labor, Meretz and others on the economic Left unrealistic.NOR HAVE Labor and other Left-wing parties managed to muster a significant constituency for more pro-actively generous diplomatic policies vis-a-vis the Palestinians. A majority of Israelis might well support a two-state solution that includes painful territorial concessions. But the ongoing sense of Palestinian leadership intransigence means that Israelis are wary.Kadima’s current strong standing in the polls – taking much of Labor’s support – has been built on its ability to put forward a diplomatic approach perceived as being just to the left of Likud. Tzipi Livni has argued articulately that attaining a two-state solution, ensuring a Jewish majority in a more modestly sized Israel, is essential to ensuring that Israel remains both Jewish and democratic.The Israeli center-right to center-left mainstream divides between those who believe Netanyahu, now a declared advocate of a two-state solution, is balancing that imperative with the necessary caution, and those who feel he should be making a greater effort. But there is precious little room in that crowded middle ground for what is left of Labor.To distinguish itself, Labor may choose to move farther to the Left, but that would take it close to the ideological hinterland occupied by Meretz, which managed to garner just three Knesset seats in the last elections on a left-wing platform.Labor in recent years presented itself as more moderate than the Likud on peacemaking, and more empathetic to the have-nots economically. But the bitter truth underlined by Monday’s political drama is that it has ceded much of that ground to Kadima.