“Wherever we hand them land and pull out, we get, shortly thereafter, radical Islamic terror,” Bennett said in a Bloomberg Television interview in Tel Aviv.

His comments reflect the divisions in Prime Minister Benjamin Netanyahu’s coalition over peace talks with the Palestinians. Finance Minister Yair Lapid said today the land seizure in the Gush Etzion region was taken without cabinet approval, and “causes damage” to Israel.

Israel this week announced it was declaring about 1,000 acres of territory south of Bethlehem as state property, clearing the way for eventual construction of new settlements there. The step was condemned by the Palestinians, the U.S. and the United Nations as detrimental to the peace process.

“This decision, which leads to a further deterioration of the situation, must be blocked,” Nabil Abu Rudeina, a spokesman for Palestinian President Mahmoud Abbas, said of the Israeli move in a statement yesterday.

‘Part of Israel’

The U.S. called on Israel to reverse the land appropriations, and expressed concern about other reports of settlement plans in east Jerusalem. Such measures are “contrary to Israel’s stated goal of negotiating a permanent status agreement with the Palestinians, and it would send a very troubling message if they proceed,” U.S. State Department spokeswoman Jen Psaki said in an e-mailed statement.

The European Union also condemned the land appropriation and called on Israel to reverse it.

“The Etzion bloc has always been part of Israel before the establishment of our state, and afterward,” Bennett said, referring to Jewish communities in the area prior to the 1948 war in which Israel gained independence. The government’s stance is that the region should remain under Israeli sovereignty in any final peace deal with the Palestinians.

The land-for-peace premise underlies decades of diplomatic efforts to reach a two-state solution. The Palestinians say Israel’s settlement construction and its demands to retain control over security in the area undermine their right to a viable state. Israel captured the West Bank in the 1967 Middle East war.

Economy Hit

Bennett, 42, heads the Jewish Home party, which holds 12 seats in Israel’s 120-seat parliament and is the third-biggest faction in the coalition. Jewish Home opposes any peace deal that would allow the Palestinians a fully independent state in the West Bank, instead advocating they be granted limited self- rule in parts of the territory.

Israel’s economy has been “hit” by the seven-week conflict with the Hamas Islamist movement that rules the Gaza Strip, though its robust technology industry will help ensure a quick recovery, Bennett said.

During the conflict, Bennett advocated a full ground invasion of Gaza to topple Hamas, a position rejected by Netanyahu. The premier accepted an Egyptian-negotiated truce with the group, which is classified as a terrorist organization by Israel, the U.S. and European Union.

“Sooner or later we will need to wipe out Hamas,” Bennett said today. “I’m not sure now is the right time.”