The first years of the Bush administration were one big missed opportunity with regard to the Middle East. Approximately a year ago, the U.S. president apparently woke up to the fact that it was here, ironically, between Israel and the Palestinians, that there was a shred of hope, and that this hope could turn into the only positive legacy of his presidency. Last November, he launched the Annapolis process that was supposed to lead to a final-status agreement within a year.

But the parties to the process failed to take up the gauntlet. Despite the fact that, on both sides of the barricade, there were pragmatic decision makers who were willing to compromise to reach an agreement, they acted as if they had all the time in the world. There was a personal chemistry between them that even reached the level of kisses and hugs and cordial interactions. However, they spoke very little to one another, and after 10 months they found themselves at a dead end.

The four-year term of Palestinian President Mahmoud Abbas is set to end on January 9, and even if some judicial authority can be found to extend it by another year, Abbas is liable to lose his legitimacy to continue. Without a significant peace agreement, he is very likely to go down in Palestinian history as a weak leader who lost the Gaza Strip to Hamas and whose struggle for a Palestinian state born of agreement rather than terror did not succeed.

At the end of those same 10 months, Prime Minister Ehud Olmert is officially a criminal suspect who is slated to resign within the next few days to head a transition government. Any decision he takes vis-a-vis the Palestinians could be tainted with the serious claims being laid against him.

Bush is waiting in vain for both men. January 20 approaches and he stands to end his tenure with nothing to show for it, despite his promises and his demonstration of infinite optimism.

And still, the hope of Autumn 2008 remains. A victory by Tzipi Livni in the Kadima primary could lead to the formation of a new government. With her selection, she is likely to enjoy a decisive, 70-MK majority in the Knesset, the kind that any other prime ministerial candidate could only dream of. It would not be her coalition, but it would form a solid foundation for one, with the addition of other parties.

This government would be able to continue with the current negotiations, but within a focused framework that would enable marathon sessions until the parties reach a full agreement that will be implemented in accordance with the facts on the ground.

Meanwhile, negotiations would be held on the principles of the agreement, the content of which could be taken from the detailed negotiations. The agreement of principles could be reached within one year of the Annapolis summit, after the November elections in the U.S., in coordination with the president-elect.

This window of opportunity, between November and January, was used to full advantage by Ronald Reagan and George Shultz in 1988 to recognize the Palestine Liberation Organization, and by Bill Clinton in 2000 to present his parameters for a final arrangement.

The principles could stipulate agreement over the creation of a Palestinian state whose borders with Israel would be based on the 1949 borders, with mutually agreed changes. And the Palestinian refugee issue would be resolved through return to the new state, with compensation for lost property and suffering, and absorption into states willing to accept them (in accordance with the sovereign decision of the states and with Israel taking part in the solution).

As for Jerusalem, the parties would agree that both capitals would reside within the current municipal boundaries, that the capitals would share an "umbrella" municipality, that the Arab neighborhoods would be Al Quds and that a special status would obtain for the city's holy sites.

These principles, together with an American commitment to implement the agreement and provide security guarantees, could bring about a significant change in the situation, strengthen the pragmatists within the Palestinian camp and expedite the detailed negotiations toward a final settlement.

I am convinced that if these principles are agreed to by both parties, they will earn a robust majority in the cabinet and in the Knesset, and if put to a referendum, they will be affirmed by a decisive majority.

Olmert, who has undergone a great ideological change since his Knesset vote against the Camp David Accords 30 years ago, believed that the journey he made would enable him to persuade the Palestinian leadership to reach an agreement of principles. But the rather small distance between him and Abbas was not bridged. As a prime minister who has resigned, he cannot reach an agreement, but his successor will be making a big mistake if he or she treats Autumn 2008 as a transition season. Without an agreement of principles, Winter 2009 could be one of the worst of our lives.

Yossi Beilin represents Meretz-Yahad in the Knesset.