Israel is on the brink of international isolation, Justice Minster Tzipi Livni said Thursday, and warned that the country’s economy will suffer if a peace agreement were not pursued urgently by Israel’s leaders.

“We are at the last minute before isolation,” Livni said in a conversation with students in Rishon Letzion.

“Anyone who is worried about cottage cheese and housing prices, which is perfectly legitimate, needs to understand that an isolated country, which pushes forward processes that are seen by the world as illegitimate, is a country whose economy will be affected.”

The justice minister, who leads the Israeli negotiating team to US-brokered peace talks with the Palestinians, went on to comment on the recent rise in terrorist attacks perpetrated by Palestinians, saying the attacks should not be used as a pretext to halt peace negotiations.

“We have to fight terrorism, there is no question about that,” Livni said. “The onus is of course on the Palestinian Authority, even while we are negotiating. But this perception — that if there is terrorism then negotiations must stop and that if there is no terrorism, then we should not talk with anyone, because everything is fine, this is something that cannot continue.”

Livni criticized Housing and Construction Minster Uri Ariel for publishing tenders for the planning of 20,000 settlement units in the West Bank, and said that construction beyond the Green Line would not advance peace.

“Uri Ariel is a ‘Greater Israel’ representative who wants to build more and more in order to prevent any chance of an agreement,” she said.

“I say, let’s go right now to a referendum and see what Israel thinks about building in those isolated settlements, which do not represent the majority.”

“We need to understand that if we do not determine the conditions in which we want to live, someone else will determine it for us,” she added.