"The implications of the absence of a solution to the Israeli-Palestinian conflict is more existential than the Iran nuclear issue," the Jerusalem Post quoted Diskin, former head of the Israel Security Agency, known as Shin Bet, as saying Wednesday in Tel Aviv.
Officials in Prime Minister Binyamin Netanyahu's office slammed Diskin's statements, saying anyone "who thinks that the Palestinian threat is greater than the threat of a nuclear bomb in the hands of Iran, which calls for the destruction of the state of Israel, is divorced from reality and lacking any strategic division."
To reach a final peace agreement with the Palestinians, Israel must freeze all settlement activity outside the big settlement blocs, Diskin said. The release of Palestinian prisoners must occur only in the final stages of negotiations, he added.
"We need an agreement now, before we get to the point of no return, after which a two-state solution will be impossible," Haaretz quoted Diskin as saying. "I want a homeland that does not require the occupation of another people in order to maintain itself."
In July, at Washington's initiative, Israel agreed to enter renewed negotiations with the Palestinians. As part of the process, Israel agreed to release 104 Palestinian prisoners in four stages.