He added that "corruption and racism are strategic threats on the State of Israel.'
In his speech at the Herzliya Conference, Peretz defended the defense establishment's conduct during the second Lebanon war.
"In spite of the malfunctions, this war had important achievements," he said. "We eventually changed the situation in southern Lebanon. We proved that rocket threats, kidnappings and terror cannot paralyze us and make us helpless."
Peretz called on the government to focus on the Palestinian issue.
"We have to focus on the Palestinian arena. We must not freeze while Hamas is growing stronger. We must not reach a situation of the military being pulled into Gaza without reaching a diplomatic solution.
"The realignment plan is gone and we must form a new diplomatic plan. The Labor Party will submit a new plan to the government, combining the Road Map and the Saudi initiative. It is important for Arab countries to take part in implementing the plan."
According to Peretz, "Israel is not the only one facing the growing risks. So are the moderate regimes in the Arab world. On the one hand, we must prepare the IDF and the defense establishment to deal with military threats while understanding the lessons of the Lebanon war. On the other hand, we must try to utilize the opportunity to the fullest. We must strengthen the moderate elements and prevent deterioration in the different arenas."
Peretz. 'Focus on Palestinian front' (Photo: Uri Porat)
Peretz, a resident of the rocket-battered town of Sderot, said that he recently asked Major-General Amos Malka (res.) to head a team which would present its recommendations on how to defend Gaza vicinity communities against Qassam rockets.
"We must make the fortification of the home front a key national objective in every scenario and confrontation, both in the north and near the Gaza Strip," he said.
'We are moving in the right direction'
The defense minister took advantage of the conference in order to explain his decision to appoint Israel's first Arab minister.
"This decision is derived from my belief that the way to remove roadblocks starts by providing appropriate representation on all levels," he said.
"I assume that any appointment I would have suggested would have immediately received political interpretations. Even if I had appointed a Jewish minister, people from all directions would have spoken against it. Political constellations have always created great opportunities."
Addressing the ups and downs of the past year, Peretz said that "2006 was a year with unexpected events. A year ago, when I stood before you and presented my diplomatic plan, it was clear that we were moving in one direction. Since then, the situation changed dramatically – Hamas rose to power, there was a political revolution in Israel, changes occurred in the different parties, the war took place.
"As the chairman of the Labor Party, I believe that national strength is comprised of military power and social strength. We are expecting the most significant period of time in the past few years. I am certain that we are moving in the right direction and hope we have managed to stop the social deterioration," he concluded.