Foreign Minister Avigdor Lieberman said on Tuesday that Prime Minister Benjamin Netanyahu’s status-quo approach to the Palestinian conflict has failed and that without an Israeli initiative the country will face a “diplomatic tsunami.”

Speaking at a closed conference at Tel Aviv University, Lieberman said that absent an Israeli-Palestinian agreement, Israel’s relationship with the European Union would deteriorate severely, which would in turn damage the Israeli economy.

“Look what’s happening with Russia,” the Yisrael Beiteinu party chairman said, referring to the EU sanctions imposed on Moscow due to its aggression in Ukraine.

Lieberman slammed Netanyahu, saying his “sanctification” of the status quo had failed.

Lieberman stressed the importance of Israel’s relationship with Europe and the economic damage a rupture could cause, at times sounding more like Labor Party chairman Isaac Herzog or Hatnuah chairwoman Tzipi Livni than the right-winger he is usually considered. He didn’t explicitly mention the possibility of EU sanctions, but the hint was clear from his comparison of Israel’s situation with that of Russia.

“We must reach a diplomatic agreement — not because of the Palestinians or the Arabs, but because of the Jews,” he said. “This is important for our relations with the European Union and the United States. For anyone who doesn’t know, our largest market is the EU, in both exports and imports. I’m pleased with what we’ve done with the Chinese; there’s been growth in our trade with them. But in the end, our biggest market is the EU.”

Anyone who thinks it’s possible to maintain good economic relations with Europe if the diplomatic relationship deteriorates is deluding himself, Lieberman stressed.

“It doesn’t work, and we must internalize this. When diplomatic relations deteriorate, you see what happens to the economy. I can cite the example closest to me, that of Russia,” added Lieberman, who immigrated from the former Soviet Union. “The more developed the state, the more sensitive it is to political decisions or changes in economic relations based on treaties and agreements.”

Lieberman said Israel should pursue a regional peace deal that would also resolve the Palestinian and Israeli Arab issues. “We need to put an end to all these arguments and reach an agreement with our entire surroundings,” he said.

Later, in the question and answer session, he blasted Netanyahu’s policy.

“What’s happening now is that we aren’t doing anything,” he said. “There’s no initiative. I favor initiative. We must initiate. When you don’t initiate, you lose.

Netanyahu’s status-quo approach has failed, Lieberman said, adding, “I respect Netanyahu, but the approach I’m presenting is more correct at this time.”

Asked if Israel was facing a diplomatic tsunami, Lieberman said it was “far from being a tsunami” and he hoped it would never become one. “But if we don’t initiate, we’ll reach a tsunami. The initiative must be a comprehensive regional agreement.”

Lieberman also criticized the diplomatic approach of Economy Minister and Habayit Hayehudi chairman Naftali Bennett, who favors annexing large swaths of the West Bank.

"There is Bennett's approach – of one binational state," said Lieberman. He says, "Not one inch. No compromise. Israeli sovereignty over Area C. But there is what is desirable and there is reality."

Lieberman said that Bennett's plan would spark a crisis with the Arabs and with the West, specifically the U.S. and EU. "I don't want one state for two peoples," said Lieberman. "I want a strong Jewish state."

The foreign minister then went on to critique the Labor Party approach as well, saying it is pushing for an agreement with the Palestinians "at any price."

However, Lieberman said, "There is no such thing as any price. There is no such thing as an agreement only with the Palestinians. I am talking about a regional plan – with the Palestinians, Arab countries and Israeli Arabs."

He added that a regional plan is feasible and can be implemented. "I can't say that it will happen in four months," he said, but it is certainly possible.

Another attendee asked Lieberman about the future evacuation of settlements as part of a peace plan, and he replied that the territorial issue can be resolved. He said the large settlement blocs would be included within Israel's future borders in any deal with the Palestinians.

"It's clear to everyone that a [land] swap is necessary," said Lieberman. "Settlement blocs were discussed at Camp David and at Annapolis," he said. "We will have to evacuate individual settlements. We evacuated Gush Katif [in Gaza]. There are solutions to this issue. I'm less concerned about that."

Lieberman also addressed the harsh criticism leveled at American officials by some of his colleagues, saying, "There are differences of opinion with the U.S. and not for the first time. We always knew how to handle that away from the media spotlight and in a respectful way. Two weeks ago, Congress approved the U.S. budget. U.S. military aid [to Israel] stands at $3.1 billion with another $600 million for Iron Dome. I don’t see any replacement for that."

He noted how during Operation Protective Edge in Gaza, Israel ran out of critical ammunition. "The Americans supplied us [with more]," he said. "Now we are asking them to impose a veto [at the UN Security Council]. You can’t ask for help with a veto, with military aid. They vote with Israel at every possible forum. The damage to this friendship carries diplomatic, security and economic repercussions. That's why we must understand our how to conduct ourselves with friends even when we disagree."

In response to Lieberman's comments, senior Likud officials said that "It’s clear: Lieberman has shown that he has broken left with Tzipi [Livni], Bougie [Isaac Herzog] and [Yair] Lapid."

"Israeli citizens need to know that a vote for Lieberman would lead to a left-wing government headed by Tzipi and Bougie, and the establishment of a Palestinian terror state - a second Hamastan, near Kfar Saba, Tel Aviv and Jerusalem."

Deputy Education Minister Avi Wortzman (Habayit Hayehudi) on Wednesday responded to Lieberman's remarks, addressing Yisrael Beiteinu lawmakers in a post on his Facebook page.

"Ministers Landau and Shamir – why are your voices not being heard? Last night, the head of your party, Avigdor Lieberman, continued his journey to the left, saying that settlements must be evacuated and that we did the same in Gush Katif and that there are solutions. I ask you – why are you staying silent?"

Wortzman attacked the ministers, asking them, "How can you allow the party head who represents you to abandon the path on which you were raised and are raising [your children]?" He accused their party of abandoning the ideology of the nationalist camp, saying "Yisrael Beiteinu [Our Home] is no longer your home."

