Israeli Negotiator Livni Says Peace Crucial for Israeli Economy

Israel’s chief negotiator with the Palestinians said a peace accord is critical to the country’s economic growth, which has slowed after a rise in the currency cut exports.

“We don’t want to be an isolated island,” said Justice Minister Tzipi Livni, who has six months to reach an agreement with the Palestinians under a timetable set by U.S. Secretary of State John Kerry when he initiated the talks in July. “Stalemate and stagnation led and can lead in the future” to economic decline, she said.

Speaking alongside Livni at a conference in Herzliya, Israel, Finance Minister Yair Lapid called for a map delineating “the final borders” of a Palestinian state, and said “tens of thousands of settlers” would have to be evacuated from the West Bank under an accord. He also set a condition the Palestinians have rejected: No partitioning of Jerusalem, whose eastern sector Israel captured in 1967 along with the West Bank, and which they claim for a future capital.

Kerry and Israeli Prime Minister Benjamin Netanyahu met for almost seven hours in Rome yesterday, and both said they had a thorough talk about the negotiations. The secretary of state also briefed Netanyahu on talks with Iran to limit its uranium enrichment program because of suspicions the Persian Gulf nation may develop nuclear weapons.

Linkage Made

Netanyahu linked the two issues, saying that easing pressure on Iran to dismantle its nuclear problem would make it harder for Israel to deliver compromises needed for peace with the Palestinians. He emphasized to Kerry the importance of stringent security arrangements for Israel, because instability in the West Bank could cause Palestinian President Mahmoud Abbas to lose control, as happened in the Gaza Strip, now ruled by the militant Hamas group.

Israel endured two years of recession and a longer period of sluggish growth after the Palestinians mounted their second major uprising, known as the intifada, in 2001. Growth has lagged this year as the shekel has gained about 6 percent against the dollar, making it the strongest of 31 major currencies. Lapid noted the difficulty for Israeli exporters and said he will work with designated Bank of Israel Governor Karnit Flug to combat the shekel’s gains.

The currency weakened after Lapid’s remarks, declining as much as 0.5 percent before trimming the decline to 0.1 percent at 3.5235 at 17:17 p.m. in Tel Aviv. It had appreciated as much as 0.3 percent before the minister spoke.

Amid the disagreements over Jerusalem, security arrangements, final borders and West Bank settlements, Israeli President Shimon Peres said he still believes Abbas will ultimately reach an agreement with Netanyahu.

“I’m not saying he agrees with us, but there is enough to bring the sides together, Peres said at the conference, which was organized by the Jerusalem Post newspaper.

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To contact the reporter on this story: Jonathan Ferziger in Rome at jferziger@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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