Israeli finance minister warns of economic fallout if peace talks fail and EU boycotts

JERUSALEM – Israel’s finance minister says if peace talks with the Palestinians breakdown and lead to a European boycott, Israel’s economy will suffer badly.

Yair Lapid says Wednesday that without a diplomatic solution to the conflict, all Israelis will feel it in their pockets.

European officials have warned that Israel could face deepening economic isolation if it presses forward with the construction of Jewish settlements. A small but growing number of European businesses and pension funds have begun to drop investments or limit trade recently with Israeli firms involved in West Bank settlements.

The European Union is Israel’s largest trading partner. Lapid says even a limited boycott will raise the cost of living and lead to a cutback in government services. He said Israel’s economy was more vulnerable than its security.