Conventional wisdom has it that Labor is hemorrhaging support in opinion polls because of the obstinate focus of its new chairman, Amir Peretz, on socioeconomic issues when Israelis are obsessed with security concerns. Peretz, however, is adamant that he is about to emulate Menachem Begin by winning the prime ministership as a "social general," delegating defense and security matters to expert colleagues. In the final month of the campaign, he argues, voters will swing behind Labor as the only major party genuinely committed to narrowing domestic inequalities. In this lengthy interview with The Jerusalem Post, conducted at his bustling headquarters in Tel Aviv's Hatkiva neighborhood last week, Peretz, nonetheless, does expound on his stance vis-a-vis the Palestinians, including his views on settlements and the rise of Hamas. The Labor chairman is confident and good-natured, though frustrated at our disinclination to focus primarily on the economic points of contention he most wants to discuss. As a resident of Sderot, at a time when there are Kassam missiles falling in the South, what would you, as prime minister, do about that situation? The Kassams are one example of how Islamic Jihad is doing everything it can to stir up trouble in that area. Islamic Jihad is one of the groups that does not participate in the democratic process with the Palestinian Authority. They have no interest in maintaining the quiet. They have a shifting base of operations. Before disengagement, the launching pad for these offensives was in Beit Hanoun, or Beit Lahia, and the closest targets were in Sderot. Now there are different locations, but the effect is the same. Either way, the issue of Kassams is something we must deal with immediately, and in a thorough way, with special concentration on the areas where they [the Islamic Jihad] have concentrated. But what, specifically, would you order be done? Would you send soldiers back into Gaza? I don't think these type of questions should be left for the government, or necessarily should involve politicians. Give the army the tools it requests. When we do operations, we shouldn't do them to please the nation, but to meet a military need. The focus of governments should not be about the defense establishment. The IDF is equipped to deal with military matters. But shouldn't the prime minister become involved where national issues - such as returning troops to Gaza - are concerned? The return to Gaza is not a national decision. It should be weighed only if the army says that it has to return to Gaza because it needs to "clean" a certain area or secure it to prevent Kassam fire. I don't think that's the case. I think the IDF still prefers to operate from within Israel. I can tell you that as a resident of Sderot I am familiar with every type of Kassam, and I know what it is like to wake up in the middle of the night to a "red dawn" alert. It is not just something I read about in the papers. I know what it's like to go down with my kids to the bomb-shelters. And I still think we need to proceed with caution. I think we need to show that we can respond in many ways. Has anything fallen near your own home? One day on the radio they said that a Kassam fell into my house, but it was the house across from me - 50 meters away. That was close enough. Should we have left Gaza last summer? The withdrawal from Gaza was unavoidable. The question now is whether we have fully felt its repercussions. When you take a unilateral step, you never truly know what will be affected. The withdrawal from Gaza and the withdrawal from Lebanon were both steps that take us back to the '67 borders. If the withdrawal had taken place as part of a treaty, it would have been clear that it was part of the political negotiations. The way it happened, it gave more credit to Hamas than to Fatah. For Israel, [the withdrawal] was extremely important. It shifted the thinking of many Israelis. It ended the mentality that settlements are a holy [untouchable] thing, and allowed people to believe that dismantling settlements was necessary. What are the implications for Judea and Samaria? In Judea and Samaria we can't take unilateral steps, [though] we can evacuate settlements, one by one, here or there. It's like a pressure cooker: To relieve the pressure, we may dismantle a settlement here, a settlement there. When the heat rises, you release pressure so it doesn't explode. If elected prime minister, what would be your first moves regarding the territories and the Palestinians? Many factors in the Palestinian-Israeli conflict are largely dependent on the Palestinians, and not on us. We keep trying to take the role of the PA. It's not for us to say whether there is a partner or not. What I would say is that I will come to the negotiating table if there is a Palestinian partner elected on the other side that would talk about permanent solutions. I do not think we should be taking unilateral steps before exhausting the option to negotiate. There are three things we should do immediately. One, to adopt the recommendations of the Talia Sasson report, and dismantle the illegal outposts. Two, stop all funding to expanding communities [in the West Bank] and only continue with the minimum aid needed to maintain the communities. Currently, there is large-scale funding. I am for continuing funding only for the most minimal, basic things, such as health and education. We need to stop building in those areas. Instead, we should put those funds into developing the Negev and Galilee, where we can expand opportunities for our youth. And the third thing I would do [as prime minister] is promise to enter negotiations no matter what. To declare a readiness for intensive negotiations. Remember, there's not a single Israeli politician with as much negotiating experience as I have. With all due respect, there is no difference between political negotiations and economic negotiations. I've learned a few things. First, you can't sign an agreement according to which the other side loses everything, because then they have no motivation to honor that agreement. And second, you have to know what your partner is willing to concede. You need to know what is the most the person sitting across from you can give. Also, no good negotiator puts his cards on the table more than two weeks before the final date [for ending the talks]. Until then, you keep your cards close to your chest. Coming back to funding, you'd freeze funds even for the major settlement blocks? We need to be realistic. We need to show that we will take realistic steps in negotiations. And we need to say that our real development will be in the Negev and the Galilee. Every shekel that we invest in those areas is a shekel for the future of Israel. We need to get to the negotiating table. People know that something must be done. Soon we will be ending our 60th year as a state. But for more than 100 years, we have been trying to come to some sort of agreement over these lands. We have had to continue deliberations because we have not come to any final conclusion over what belongs to each side. Once we do that, things will look different for both sides. The longer we wait, the worse it gets. Fundamentalism becoming more deeply rooted. Our partners 20 years ago were not like our partners now. A Palestinian state is a Palestinian interest but it is also in Israel's interest. It is also question of ethics. The basic definition of Israel, as a Jewish and democratic state, is not clear-cut. A state has to be open to every religion, to everyone who wants to be a part of it, but we have defined ourselves as a Jewish state. I think that this ethical question affects the citizens of Israel to a great degree, and it directly contributes to the lack of internal solidarity. We need to find a solution at the negotiating table, before it is too late. Is it too late to find a partner in the West Bank now, with the rise of Hamas? If Hamas controls the government, it will be a different playing field. Hamas, as it looks today, is not a partner. It regards Israel as something that needs to be erased. The question is whether Hamas is a religious organization or a political organization. We can only continue to hope that the majority of Palestinians want to enter into negotiations. In the meantime, the Palestinian nation is in serious regression, economically. I hope that the moment there is a Palestinian state, they will concern themselves with internal development rather than with terrorism. What makes you think we can reach a territorial accommodation with the current PA leadership? Do you have direct contacts? I have people bringing me information I rely on. I hope it's not wishful thinking or unfounded. If people had listened to me in 1984, when I was a young mayorâ€¦ I was saying then that we needed to create a Palestinian state. Are the Palestinians willing to give up on the right of return? I don't need to weigh what they think. I need to determine that the right of return has no consensus in Israel. It makes no sense for me to come to an agreement that, in the future, will cause Israel to lose our Jewish majority. Any concession I make - any agreement I reach - is based on retaining a Jewish state. A majority must know how to treat its minority but, at the most basic level, we need to maintain a Jewish majority here. So the right of return is not even a question for the negotiating table. No statesman or politician would agree to it. What about dividing Jerusalem? My thinking regarding Jerusalem is simple. There are areas that are clearly a part of Israel, but we need to come to an agreement whereby everyone can practice his religious beliefs. In the end, the state of Israel needs to decide how many Palestinians it is willing to absorb. It's not about taking a yardstick and measuring out Jerusalem. You can't decide that an area is yours without saying the people who live in it will receive full rights. Again, we need to ask how many Palestinians we are willing to absorb, and decide [about Jerusalem] on that basis. You mean that the demographics of Jerusalem should determine where we wish to retain sovereignty? We need to decide how many [Jerusalem Palestinians] we are willing to absorb into Israel. Do you believe you can win the prime ministership with a campaign focused on a socioeconomic platform, rather than on defense and security? The biggest revolution in Israeli politics - that made by Menachem Begin - was entirely based on social issues. People voted for him to improve their lives. Things are even worse now than they were then. Back then, we didn't have such a wide gap between the classes. There is a tradition that the prime minister in Israel should be a military man, who then appoints professional people to the areas of finance and social affairs. I say the opposite: The prime minister should be a social general and he should appoint people in the area of defense. It works my way in most of the world. Well, most democratic governments aren't fighting for their countries' daily survival. Today you can't say that anymore. In London and in the US, they are experiencing terrorism as wellâ€¦ You can't really compare...? I think that the issue of borders is more vital to Israel than the issue of securityâ€¦ (At this point, an aide interrupts the interview to pass Peretz a note to the effect that Ehud Olmert is having lunch at a Jerusalem soup kitchen. Surprised to hear that the finance minister is doing this, Peretz quips sarcastically, "What a great way to fight poverty: He's eating all the food meant for the poor," before returning to his train of thought on the focus of his campaign.) ...Things have changed in the past month, especially with the issue of Iran. Elections for the Palestinian Authority are soon being held. But in the final month of [our] election campaign, when we get to the finishing line, socioeconomic issues will determine who wins. But why ignore defense issues? Why give up on the voters such issues would attract? And who, by the way, will represent you on defense matters? I have the best defense representatives of any party: Ami Ayalon, Matan Vilnai, [Binyamin] "Fuad" Ben-Eliezer, Danny Yatom, Ephraim Sneh. Show me another party that has more defense people than we do. Will Ami Ayalon bring you votes from the center? Isn't he considered too Left? Ayalon has been singled out by voters as being the top choice for defense. But I am not handing out positions, and I won't say who will be my defense minister. I am not a party of just one man. I do not have the privileges Sharon has - to enter a room by myself and choose my party list. I think [Sharon's sole control of Kadima] is a great danger and a sign of a deteriorating democracy. People in Israel are afraid to speak because their whole fate lies in [the hands of] one man. What could Sharon do differently in Kadima? We're told that 25,000 people have become members of Kadima. So why not hold a vote among them [for the Knesset slate]? If [Sharon] wanted to, he could organize that. I am troubled to see elected officials acting in this way - acting solely in their own interests. I could have been prime minister [if I'd chosen to act similarly]. I could have joined [and headed] a coalition of 61 Knesset members [staving off elections]. Was that really a possibility? It was an option, but not a real option. Just a political option raised to hurt someone else. If Sharon [as head of Kadima] wasn't able to promise [Knesset and ministerial] positions [to his party recruits], what else could he offer? One member gets to be an MK, one gets to a minister, and they all line up. But you don't think that Tzahi Hanegbi and Haim Ramon and Dalia Itzik and Ruhama Avraham actually have anything in common, do you? Sharon's party is concerned with handing out political appointments, but ultimately the Labor party will have the best candidates to offer Israel, [and voters] will look at us as a group, and not as a party of one person. When our members have chosen the Knesset list, I will present our party to the nation. I will say: "Here are our people; here is what we believe in; look at us as a group." My revolution is turning the pyramid on its side. The social general has to surround himself with people who are strong on defense issues, but what he needs is to prioritize. What would you do in regard to Iran? Iran is not an Israeli problem; it is a global problem. Would you join a coalition if Sharon won the election? I hope I will be the one to create a coalition. The minute that there are three parties, that changes the balance of everything, including coalitions. But for now I am part of the opposition. I think a country without an opposition is a very dangerous thing. Why are we talking about this, though? Let's talk about the important issues - the socioeconomic issues - like the minimum wage. OK, explain your thinking on the minimum wage. We compare ourselves to Western countries, but our minimum wage is a fraction of theirs. It's too low when compared to that of countries we like to compare ourselves to, such as Britain. When Clinton was in Israel [in November], I asked him what happened when he raised the minimum wage [in the US]. He said that everyone told him it would hurt the economy, but that didn't happen. He told me that what he regretted most was not raising the minimum wage high enough. When I visited Ireland, I was told that when the minimum wage was low, there was no motivation for owners to invest money, to improve technology and the quality of the workplace. The workers are like slaves. What are the facts? In the US, the minimum wage is $5.50 an hour. In the UK, it is $6.61. In Ireland, it is $9.30. In Israel, it is only $3.70. There is less purchasing power. Building starts are at a 20-year low. Everyone knows now that our economy is in danger. We need better services to do more for the people. We need to remember that, with capitalism, all that glitters is not gold. And let me just say a final word about manpower companies: They shouldn't be allowed to turn workers into virtual slaves; the proportion of the work force they control needs to be cut back dramatically. Make sure you write that down.