Having totally failed his first leadership test last week, Prime Minister Binyamin Netanyahu today faces an even stronger test of his character at his White House meeting with President Barack Obama. The Americans have made it plain what they expect. Vice President Joe Biden was exceedingly blunt at the recent AIPAC convention: "Israel has to work for a two-state solution... You're not going to like my saying this, not build more settlements, dismantle existing outposts and allow Palestinians freedom of movement," while Secretary of State Hillary Clinton was just as uncompromising at the House of Representatives Appropriations Committee: "For Israel to get the kind of strong support it is looking for vis-a-vis Iran, it can't stay on the sidelines with respect to the Palestinians and the peace efforts. They go hand in hand." Obama, meanwhile, has scheduled a heavily touted speech to the Muslim world to be made in Cairo in two weeks. One doesn't need to be a fortune teller to realize that Obama wants to be able to tell the Arab world that under his presidency, the US will work for real progress between Israel and the Palestinians, and that the Israeli prime minister has signed up to this vision. According to Jordan's King Abdullah, who significantly met Obama last month in Washington ahead of Netanyahu, the new American administration is putting together the final touches to a peace plan for the Middle East, with a meeting reminiscent of the 1991 Madrid Conference pencilled in for some time this summer. The Jordanian monarch made it clear in a newspaper interview that if Obama did not deliver on his promise to kick start the peace process, then his credibility in the Arab world would be shot. Even more chillingly, he cautioned that "if we delay our peace negotiations, then there is going to be another conflict between Arabs or Muslims and Israel in the next 12-18 months." SO THAT'S the scene set for Netanyahu's visit. There will be no cozy getting-to-know-you chat in the Oval Office but rather a clear discussion as to whether Israel is going to be a partner to American efforts to improve its relations with the Muslim world or whether we are returning to the fraught days of Israeli-US relations when Yitzhak Shamir was prime minister and George H. Bush was occupying the White House. The Americans can't but help notice how susceptible Netanyahu is under pressure. This familiar trait of Netanyahu's first period as prime minister surfaced again last week during the chaotic budget negotiations. Netanyahu's whole economic credo is based on reducing government spending and lowering taxes. As finance minister under Ariel Sharon, he proved that he knows how to put his beliefs into practice. And yet, despite all his preelection pledges, and a recent cabinet decision limiting budget growth for 2009 to 1.7 percent, the government's budget for this year will be 3.05% larger than 2008, producing a ballooning budget deficit of 6% of GDP. Meanwhile, instead of lowering taxes, an extra percentage point has been added to VAT and the ceiling has been raised on National Insurance payments. This is hardly the budget Netanyahu dreamed of, and the inept way in which it was ushered in, causing the resignation of the Treasury's budget director and highlighting the impotence of his chosen finance minister, Yuval Steinitz, again raises serious questions as to whether Netanyahu really is fit to lead. THE STRANGE thing is that regarding the budget, Netanyahu was not really under any pressure at all. With a 70-plus Knesset majority, Netanyahu's coalition was never in any danger of falling, particularly not when it was this government's first budget and the 30 ministers are getting used to their new offices. Not even Shas would dream of quitting the government so soon after its foundation. Defense Minister Ehud Barak's threats of a political crisis should his budget be cut had all the seriousness of a child aiming an empty water pistol given the state of the Labor Party at present. Today's White House meeting is different, and Netanyahu really is under pressure this time. His premiership will be judged mainly by how he deals with the Iranian nuclear project and whether he succeeds in removing this threat. Obama is warning Israel not to go it alone and wants time to see whether his proposed dialogue with Teheran will bear fruit. As part of his plan to defang Iran, the American president needs not just quiet, but progress on the Israeli-Arab front. Netanyahu, who has consistently pledged that he will not allow Iran to attain nuclear arms and do "whatever is necessary" for this to be carried out, and for whom the words "two-state solution" cannot pass his lips, has to make a fateful decision: Will Israel's security be best guaranteed by working in tandem with the US in the search for a regional peace deal, which will involve a traumatic territorial compromise but also a concerted international effort to halt Iran, or should Israel seek to defend itself against Iran and continue to deny the Palestinians an independent state. While his past pronouncements would suggest Netanyahu will take the latter course, experience shows that if shoved into a corner, he shows a surprisingly ability to shake off deeply held beliefs. Obama just needs to push - for Israel's own good. The writer is a former editor-in-chief of The Jerusalem Post.