Vice Premier Avigdor Lieberman continued his attacks on Defense Minister Amir Peretz Monday, saying that everyday he continues to serve in the ministry "constitutes a serious blow to state security."

Lieberman also accused Peretz of "political manipulation."

The Labor leader was not long in responding and described Lieberman as "leading a racist party. He still needs to prove that he has made a contribution to the state."

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Lieberman had used Peretz's much-publicized decision to appoint MK Ghaleb Majadele as Minister of Science, Culture and Sport last week, for a frontal assault against the Defense Minister.

At the opening of an Yisrael Beiteinu faction meeting Monday Lieberman said that "we have no problem with Ghaleb Majadele, but we do with the Defense Minister. The way and the timing of the appointment, and the way the vote was carried out in the Labor Party's Central Committee are unacceptable. [Peretz] made cynical use of government in order to improve his position in the party."

Since Yisrael Beiteinu joined the coalition government two and a half months ago with a single cabinet minister - Lieberman as Minister for Strategic Affairs - its leader has reiterated his conviction that Labor would pull out from the government, leaving its ministerial portfolios to his own party.

At a press conference Monday Lieberman offered his services as Defense Minister.

Responding to a question on whether Lieberman and his party would quit the coalition because of the ministerial appointment of an Arab MK, he said that "I have no problem with Majadele being Muslim, so long as he accepts the principle of a Jewish and democratic state, but I would be glad to see Labor leave the government.

He also stressed that his party was due two more ministerial posts and the chairmanship of a Knesset committee. Lieberman said that he would be happy to receive the ministries of Public Security and Justice for Yisrael Beiteinu.

Peretz said in response that the decision to appoint Majadele as minister has received unacceptable responses that are contrary to public norms.

He said that the country is in danger if the appointment of an Arab minister causes a racist party like Yisrael Beiteinu such discomfort, and rouses irresponsible statements from its leadership.

"The more frequent the responses of this racist party are becoming, the more we need to support the appointment of Majadele to minister, and I hope that the whole [Labor] party will support this," Peretz said.

Following a meeting of the Labor faction in the Knesset, the party issued a statement condemning Lieberman, saying his attempt to divert the debate toward security issues is insufficient to camouflage his racist views.

"Lieberman has no right to comment on security, because he has done nothing for the defense [of the country] except to stir up the entire Middle East with his attitude," the statement read.

"The greatest threat to the country is the racism of Lieberman. If Yisrael Beiteinu cannot sit with an Arab minister in the government, they are welcome to leave it," the Labor statement said.