The plight of the resigning Labor chief seemed emblematic of the party in an uncomfortable number of ways. Labor seemed every bit as lifeless, rudderless, and as clueless about the direction of its future Monday as did its departing chairman, leading many to wonder if the party should not consider calling it quits as well.

For many in the voting public, Mitzna seemed to belong to another time, another Israel. In mood as in action, Mitzna was to the left as the left was to Israel: bitter, scorned, abandoned, self-righteous, and, ultimately, obsolete.

From a really fascinating article in Haaretz on the Labor Party's possible demise. I'm not so sure about this as a realistic possiblity, but I do think its very possible, even probable, that Shinui will replace Labor as Israel's second biggest party in the next general election. There's a bunch of reasons for this, mostly historical and some tactical.
Firstly, Labor has allowed itself to be taken over by its extreme Left. This faction, for which Mitzna was the great white hope, has simply been left behind by history. Events, the greatest fear of all politicians, has rendered them totally irrelevant, they "belong to another time, another Israel". They are still pursuing the Oslo Process out of their commitment to the once trendy ideology of post-Zionism and, put simply, the country doesn't want them. This, more then any amount of party backstabbing, was what finished Mitzna off. His party lost the election, badly. When this happens the leader goes, end of story. The Left simply doesn't get this, they think they deserve power by virtue of their own righteousness and, as a result, they have become contemptuous of democracy, arrogant, hubristic, and, ultimately, blind to reality itself.
Secondly, Labor has never dealt with the historical baggage it carries with it. Labor has always been the party of the Ashkenazim--Jews of Eastern European origin--and the Sephardim--Jews from the Islamic world--have long resented their exclusion from Labor and, as a direct result, their exclusion from political power during most of the country's first three decades. The Sephardim, who have become Israel's biggest ethnic group, are beholden to the Right not only ideologically but also historically. The Likud is their party, they brought it to power and it brought them into government. Labor has never sought to mend fences with the Sephardic Jews and, as a result, has become increasingly marginalized and provincial, remaining ethnically homogenous in a country with an immensely diverse and ever-changing population.
Lastly, Labor is seen as the party of Oslo. Now, Oslo may have been a noble attempt--I go back and forth on this--but when you drag your country into one of the bloodiest and longest wars in its history you are going to pay a political price. Labor is, quite simply, seen as the Chamberlain party, and Arik Sharon is Churchill. Not a good situation. Israelis look at Labor like Americans looked at the McGovernite Democrats. Yes, they're very well meaning, but they simply can't be trusted with life or death questions like where Israel's borders will eventually lie. Until Labor can regain credibility on the question of national security, which in Israel is, ultimately, the only real issue, they haven't got a chance in hell of regaining power, or even remaining a viable opposition.