Too early to tell what happens, probably a unity government, couple of other thoughts:
1. Very impressive that Kulanu/Kahalon will get 10 seats or so. There's no precise precedent for his movement. It's much more than I would have expected.
2. It's the beginning of the end of the narrow ethnic parties. If you add Labor/Livni, Likud, Yesh Atid, and Kulanu it's something like 75-80 seats, if you count Meretz more. The only really sizable ethnic party is the Combined Arab List and they aren't really one party, anyway.
3. I think you're also seeing the beginning of the end of the exclusion of Israeli Arabs from meaningful political power. There's just no way the center/left can get to a majority without working with them officially or otherwise. As the ethnic strain begins to decline it will become more anomalous to exclude them.
It's interesting to think what would happen if Israelis and Palestinians held a joint election. If everyone voted the way they do now, the largest single party would probably be Hamas followed by Likud, Labor, the PLO, and various narrower groupings. But of course that wouldn't happen: someone would eventually figure out that a party appealing to Jews and Arabs was the only way to prevent the extremists of one side or another from taking control. It was interesting, in this context, that Hamas called on people to vote for the Arab List rather than simply not participating. Is it possible that, deep down, they know that it won't end with armed struggle, but with some kind of political settlement?
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