Two centrist parties in the coalition – Yesh Atid and Hatnua – threatened to quit the government if it annexed West Bank settlements in response to the vacuum in the peace process.
“If even one settlement is unilaterally annexed, Yesh Atid won’t just quit the government, it will topple it,” said its party head, Finance Minister Yair Lapid, on Sunday.

He also called on Israel to freeze building in isolated West Bank settlements.
“There is no reason to continue to build settlements in areas that will not remain part of Israel in any future agreement [with the Palestinians] or to invest billions in infrastructure that at the end of the day will be given as a present to the Palestinians,” Lapid said.
“I prefer to spend that money to improve the lives of Israeli children, rather than on improving the lives of Palestinian children,” Lapid said.
He was one of four party leaders who presented their future vision for the peace process at the Herzliya Conference.
The panel “Israeli leaders debate peace” featured Justice Minister Tzipi Livni (Hatnua), Economic Affairs Minister Naftali Bennett (Bayit Yehudi) and Labor Party leader MK Isaac Herzog.
Interior Minister Gideon Sa’ar represented the Likud party.
They spoke in the aftermath of a US-led nine-month negotiating process that ended in April with no tangible results.
The collapsed talks and last week’s formal swearing-in of a Fatah-Hamas unity government, have strengthened political voices who believe Israel should annex West Bank settlements, particularly those in the blocs where the bulk of the Jewish population is concentrated.
Bennett said he has already presented a sovereignty plan to Prime Minister Binyamin Netanyahu and to the security cabinet, which met twice last week to discuss the unity government.
The security cabinet created a team that will study Israel’s options, including annexation and withdrawal plans.
Bennett told the Herzliya audience that his sovereignty plan called for a gradual annexation of Area C of the West Bank, starting with the Gush Etzion bloc, south of Jerusalem.
But both Lapid and Livni said they would not stay in a government that supported annexation. Herzog called on both of them to immediately quit the government.
Lapid said he believed it was possible to resume talks with the Palestinians at a future date. He presented a three-phased plan for those future negotiations, which would require a map of Israel’s future borders.
Israel must already work to determine what that map should be, he said.
In the plan’s first “preparation” phase, building in isolated West Bank settlements would be frozen and Israel would withdraw from areas of the West Bank in which no Jewish communities are located, Lapid said.
In the second “trust-building” phase, Lapid called for Israel to withdraw from isolated West Bank settlements.
Under the auspices of the Untied States, Israel would hold direct talks with the Palestinians about the final borders for a final status agreement, Lapid said.
In the final “adjustment” stage Israel’s borders and that of a future Palestinian state would be finalized, through a process that would include land swaps. Talks would also be held on other core issues of the conflict not related to borders.
Both he and Livni spoke of a final status agreement that included maintaining the settlement blocs, but they did not specify what those blocs included.