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INTERVIEW-Israeli ex-security chief sees risk of Palestinian uprising

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* Spy-chief-turned-politician says peace talks a priority

* A settlement still seen possible despite numerous hurdles

* Other Israeli parties seen sidelining issue ahead of vote

By Crispian Balmer

JERUSALEM, Jan 8 (Reuters) - Israel faces the prospect of a
new Palestinian uprising because of despair over the gridlock in
peacemaking, a former head of the Israeli internal intelligence
agency who is standing in the Jan. 22 election said on Tuesday.

Yaakov Peri, running for the centrist Yesh Atid party, told
Reuters in an interview that the next government must make peace
negotiations with the Palestinians its foreign policy priority.

"Israel must do everything to come back to the negotiating
table and find a compromise," he said, criticising other leaders
from across the political spectrum for playing down the issue.

The Israeli military has reported growing violence across
the occupied West Bank in recent weeks, prompting warnings of a
possible Intifada (uprising) after years of relative calm.

"Are we on the edge of a third Intifada? It is a real
possibility because of the amount of despair coupled with the
(political) stalemate," said Peri, who headed the Shin Bet
security service from 1988 to 1994 - a time that coincided with
the first Intifada.

Shin Bet is responsible for overseeing intelligence
gathering in the Palestinian Territories and Peri warned that
fundamentalist Islamist groups hostile to Israel would seize the
initiative if there was no peace initiative.

He added that another Palestinian revolt need not be
violent, but could evolve into a mass protest movement.

Peri's Yesh Atid (There is a Future) party is led by former
television news anchor Yair Lapid. It is projected to win up to
10 seats in the 120-seat parliament and has not ruled out
joining a coalition led by Prime Minister Benjamin Netanyahu.

U.S.-brokered direct peace talks broke down in 2010 in a row
over continued Jewish settlement building on land where the
Palestinians want to establish their own independent state.

Mutual recrimination now reigns. Netanyahu says he sees no
partner for peace and Palestinian President Mahmoud Abbas
accuses Israel, with its settlement expansion, of destroying the
so-called two-state solution.

Further complicating matters, the Palestinians are deeply
split, with the Islamist group Hamas in sole charge of the Gaza
Strip and opposed to a negotiated solution to the conflict.


However, Peri said he was certain a deal could still be
reached, despite the fact that more than 500,000 Israeli
settlers have put down roots in the West Bank and East
Jerusalem, which were seized by Israel in a 1967 war.

"It is doable, but not easy. I wouldn't say there is hatred,
but a complete lack of faith. I think 50 or 60 percent of the
issues are already agreed upon," he said.

Netanyahu has made security the focus of his election
campaign, pledging to continue a settlement expansion programme
that has drawn international criticism.

While he looks certain to win re-election, his electoral
support has been eroded by the rising prominence of a far-right
party led by Naftali Bennett - a former settler leader who wants
to annex 60 percent of the West Bank.

Shelly Yachimovich, the leader of the main opposition,
centre-left Labour party, which was once synonymous with the
peace movement in Israel, has tried to avoid the issue for fear
of alienating the settler vote.

"The extreme right refuses to deal with the diplomatic
issues at all and is hiding its head in the sand. Yachimovich is
aiding and abetting the right without presenting the
alternative," said Peri.

"The only solution is a return to the negotiating table."

(Editing by Jeffrey Heller and Mark Heinrich)