This is a part of political struggle. I guess that alas due to constant and decades long lasting tensions the two nations are now far away from each other. Simply there is no confidence. After Oslo Accords there were hopes for peace. Now after two intifadas after thousands of dead on both sides there people do not trust themselves. Why an protestant in Northern Irland do not want to employ a catholic in his shop (and vice versa)? They do not trust each other! The same situation is here. I think the two nations should again define the border that would seperate them.
UN: Gaza could be 'uninhabitable' by 2020 if trends continue (AP)
from the article: Israeli Arab MK: Racism in Israel has reached frightening levels