"I think that we have good cooperation (with the Palestinians) on the economy and security and we must continue cooperation on these two levels and postpone the political solution for at least a decade," he said in an exclusive interview.

"I think that it's impossible in an artificial way to accelerate the political process. I think that we must move step by step. All relations between... two countries, two entities are on three levels -- the political level, security and the economy.

"We must advance step by step," said the hardline leader of the Yisrael Beitenu party, who has been largely sidelined by Prime Minister Benjamin Netanyahu in peace talks with the Palestinians.

"What we need today is a long-term intermediate agreement."

But he said he does not see what he thinks is "any readiness, any goodwill from this Palestinian leadership for a real political process. They think that they can achieve from the international community everything they want without talks, without any compromise. This is their strategy."

Asked what the steps were to achieving peace, he said "first of all we must tighten our economic and security cooperation; second, less international involvement... which creates a lot of expectations and after the expectations you get frustration and it will lead to violence and clashes."

He said there was an "overdoing, overspeaking and over involvement" on the part of the "whole international community," including the United States, the Middle East diplomatic Quartet and others.

He also pointed to what he said was the "emotional" nature of the conflict.

"It's not a logical one. Issues like refugees and Jerusalem and recognition of Israel as a Jewish state ... It's very difficult to resolve emotional issues."

And he repeated Israeli objections to Palestinian threats to declare independence unilaterally if the avenue of talks fails, saying "it's against all our agreements, all our understandings and what we signed.

"I think they will lose much more than they can gain in establishing a unilateral independent country," adding that the Palestinian Authority could not exist without Israeli assistance.

Direct talks between Israel and the Palestinians, the first for nearly two years, began in Washington on September 2 but quickly stalled when a 10-month Israeli settlements freeze expired on September 26.

The Palestinians refused to return to talks until all settlement building stopped in the occupied West Bank, including east Jerusalem.

After weeks of seeking to convince Israel to extend the freeze, Washington acknowledged on December 7 that it had failed.

Netanyahu had reluctantly accepted a US proposal to extend the moratorium for another three months, but the Israeli premier demanded written guarantees from Washington and the matter went nowhere.

The United States subsequently proposed a return to the indirect "proximity" talks the two sides had been engaged through US Middle East envoy George Mitchell.

But that was rejected by the Palestinians, who continued to insist on a halt to settlement construction.

On Monday Netanyahu said talks to secure a new settlement freeze ground to a halt when the United States stopped pressing for the ban, not because Israel rejected it, media reported.

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