Israel, along with Italy, is very frequently used as a repellent example of proportional voting systems. Many critics mistakenly blame PR for the instability of Israeli governing coalitions, with small parties being able to dissolve governing coalitions despite having only a few seats and representing a small fraction of voters. Recently, the coalition talks led by Kadima collapsed because of the refusal of the Shas (12 seats in the Knesset) to join a Livni-led government, which has resulted in early elections.
However, many forms of proportional voting exist, often producing stable governments in many countries around the world. It is the very particular ("extreme" or "pure") version of proportional voting used in Israel that could be blamed for this chronic instability of coalition governments, along with Israel's unique political climate. One distinct feature of the proportional system used in Israel is the low threshold needed to win seats – only 2%, while many countries set threshold of 5% or more. This low threshold results in a large number of parties represented in the Knesset (12, including 7 parties representing less than 5% of the votes and of the seats), thus making it unlikely that one of the major parties will be able to form a governing coalition without including multiple small parties.
National closed list system also plays a major role in shaping Israel's governments. Unlike an open list system where voters can influence the direction of a party by determining the order of the candidates on that party's slate, a closed system gives voters little ability to influence party positions on issues. Not having regional lists, where candidates are elected proportionally within regional districts, also puts more distance between representatives and voters. Therefore, voters unhappy with a major party's policy direction may be likely to shift support to any of a number of small parties.
The proportional system used in Israel is very particular, but it has some important assets. As a PR system, it guarantees fair results, make votes count, and allows for the representation of a broad range of views and sectors of society.This is particularly important in Israel, where citizens citizens have divergent nationalities, histories and perspectives. Whatever the solutions are to Israel's problems, it's not winner-take-all, as recently commented the UK based Electoral Reform Society Lewis Baston: "It is impossible to imagine a party with, say, less than a third of the vote legislating on settlements, or security, or much else, and making it stick. Israel is a very divided society, whose existence is under threat, and has unique social and political issues". If significant interests and views were not represented in Israel, it would produce a different instability, even more dangerous for the nation in the long term.
More on this issue by Malcom Clark on the UK-based Make My Vote Count blog