Couldn’t Likud form a coalition with Yisraeli and Labor?
It's a parliamentary system, the Prime Minister isn't directly elected, rather the head of the political party able to form a coalition, usually the party winning the largest number of seats. Labor is to the left of Kadima, unlikely to get along with Likud, but any sort of a coalition could be put together. Yisrael Beiteinu (16), Shas (9-10), United Torah (5), National Union (3), Jewish Home (3-4) would be the logical right wing candidates, which gets Likud to 62-64. To put together a government Livni would need to sweep all other parties, including the Arab parties, and get one or two of the right wing parties to break ranks. Always possible, they negotiate these things by offering cabinet posts and government benefits.