Tuesday, May 18, 1999 Published at 20:40 GMT 21:40 UK
World: Middle East
New era for Israel
Ehud Barak has promised peace and unity in Israel
His clear margin of victory has been welcomed worldwide as a mandate for change.
President Clinton pledged to work "energetically for a just, lasting, and comprehensive peace that strengthens Israel's security."
Victory for peace
Western and Middle Eastern leaders alike have expressed the hope that Mr Barak's win heralds an immediate revival of the Middle East peace process.
But Arab pleasure at the defeat of Mr Netanyahu was strongly tempered by scepticism and warnings that Mr Barak's policies remain largely unknown.
In his victory speech at his party's HQ, Mr Barak promised to fulfil his campaign pledge to pull out of the occupied southern Lebanon region "within a year".
But he added that in the coming months, Israel would be facing some of the most difficult and fateful decisions in its history.
With more than 95% of all votes in, the Labour leader had 56.4% of the vote against 43.4% for Mr Netanyahu, the central electoral commission said.
But although most attention focused on the prime ministerial race, Israelis also voted for a new parliament, whose composition will have a vast influence over Mr Barak's ability to govern.
In the Knesset elections, Mr Barak's Labour Party and its allies - the One Israel coalition - won only 27 of 120 seats.
The BBC Jerusalem correspondent says the question now is whether Mr Barak will try to form a national unity government, which would include Likud, or stick with Labour's traditional political allies.
Strong Shas showing
The party's leader, Aryeh Deri, then announced on Tuesday that he is stepping down to allow Shas to negotiate a coalition with Labour.
The move came after Labour indicated that it would not be able to work with the party if Aryeh Deri remained at its head following his recent conviction for corruption, bribery and fraud.
Shas threw its weight behind Likud during the election, but has now indicated it wants to be considered for a place in a coalition government with Mr Barak's One Israel party.
Likud's showing plummeted from 32 to just 19 seats.
He said he wanted to spend more time with his family.
During campaigning, Mr Netanyahu tried hard to paint his rival as soft on the Palestinians, notably accusing the former army chief of staff - and Israel's most decorated soldier - of being ready to cede parts of Jerusalem.
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