Yair Lapid said on Wednesday that canceling the association agreement with the EU, “which we know is already on the table now,” would reduce exports, cut the GDP and cause 1,400 layoffs.

Referring to the likely failure of talks between the Palestinian Authority and Israel, he added, “If there will not be a political settlement, the Israeli economy will face a dramatic withdrawal that will substantially hurt the pocket of every Israeli.”

Some Israeli media have reported that a European Union delegation has already denied any plan to cancel the association agreement over the failure of talks with Palestinians.

“If negotiations with the Palestinians stall or blow up and we enter the reality of a European boycott, even a very partial one, the Israeli economy will retreat, the cost of living will rise, budgets for education, health, welfare and security will be cut [and] many international markets will be closed to us,” Lapid stated.

The Palestinian Authority-Israeli negotiations, which resumed in July 2013, have failed to make much progress.

Israel’s settlement expansion policy is one of the sticking points in the talks.

Palestinians demand that East al-Quds be their capital and that Israel recognize borders based on the 1967 lines, which existed before the Six-Day War, when Israel captured the West Bank and East al-Quds.

Tel Aviv refuses to return to the 1967 borders and is unwilling to discuss the issue of al-Quds.

Israel also wants to keep its military presence in the Jordan Valley under any deal, but the Palestinians say an international force should be stationed there to guarantee security.

Israeli settlements in the West Bank are illegal under international law, and their continuous expansion is a point of tension in peace talks between Israel and the Palestinian Authority.

NTJ/NJF