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RAMALLAH - There is perhaps something symbolic in that the new prime minister and veteran finance minister Salam Fayad asked to hold this interview in his bureau in the new Palestinian Authority Finance Ministry. Even when the doctor of economics from the World Bank was speaking about diplomatic issues, it was clear that he was thinking in economic language.

The modest bureau and the small retinue also send a message of businesslike frugality. A conversation with Fayad is devoid of the ingratiating airs and graces of a politician and almost completely free of the complaints of a Palestinian politician about the destructiveness of the occupation. It is reminiscent of a conversation with a practical businessman, who takes into his hands a plant with a failed management and hostile competitors and has decided to make a success story of it, no matter what. Fayad's plant is called an independent, secure and flourishing Palestinian state.

Ostensibly, Fayad the economist could allow himself to play around with politics. Today he is received by the president of the United States and regularly dials the number of the Israeli foreign minister's mobile phone. If, heaven forfend, the plant collapses, he will not have to stand in line at the unemployment bureau. Fayad, who was born 55 years ago in the village of Dir al Rasun near Tul Karm, left the University of Beirut at the end of the 1970s with a bachelor's degree in chemistry in his pocket. He did his master's thesis in Houston and remained there to collect a master's degree and a PhD in economics as well. In 1987 he started working at World Bank headquarters in Washington, D.C. Shortly after the establishment of the Palestinian Authority, Fayad returned to the territories as the representative of the International Monetary Fund (IMF).

No, he does not regret having left the good life in America for the Palestinian swamp. "When the peace process began I felt uncomfortable," he recalls. "I was not at peace with myself and when I read the newspaper with my coffee out in the yard I felt a need to be part of the story. It's something much bigger than comfort or a career."

Fayad confirms that he is subject to threats and that his family fears for his life. "Courageous and strong leadership has to be prepared even to die for the sake of the goal. This is part of the business when you're dealing with the future of a people and with the question of its identity. We need to change the paradigm and stop dealing with the small change, to cut ourselves off from the past and to look ahead. To my regret, when I look back I find few leaders who did this," he said, but did not agree to specify.

Six years ago, influenced and/or pressured by U.S. Secretary of State Condoleezza Rice, who was the national security advisor at that time, Yasser Arafat appointed him finance minister. Fayad's efforts to impose order and transparency on the financial system in the PA, including a transition from paying salaries in cash to the use of banking services, were not viewed kindly at the Muqata. With PA Chairman Mahmoud Abbas (Abu Mazen), he has more of a common language, although they do not hold identical opinions. Fayad is not a member of Fatah and on the eve of the elections to the Legislative Council that were held at the beginning of 2006, together with Hanan Ashrawi and Yasser Abed Rabbo he established the Third Way Party, which won two symbolic seats in the parliament.

Going by things that he said in this interview, Fayad has reservations about Abu Mazen's intention to appoint a permanent government while bypassing the legislature and the voter's decision that gave the majority to Hamas. Fayad refuses to call it quits with Hamas, and is insisting on leaving the organization an open door to the government. He does not attribute particular importance to accepting the Quartet's conditions and is prepared to content himself with dismantling the armed militias in the Gaza Strip and the West Bank, which he sees as "the main reason for the June catastrophe."

Fayad says that to achieve a status quo, Hamas must declare that it is relinquishing its demand for control in Gaza. "The Gaza Strip is and will remain a part of the vision of the Palestinian State, but building a state and armed chaos in the streets can't go hand in hand. There will be no tolerance toward weapons outside the Palestinian Authority and its institutions."

Even though he is entirely opposed to the Hamas charter, he does not see it as an obstacle to diplomatic progress with Israel. "The way forward is open to us. The results of the elections in 2006 did not change the reality whereby the Palestinian Liberation Organization is the body that represents us and they did not erase the agreements that the PLO signed with you. As finance minister I have signed innumerable documents in the name of the PLO for the benefit of the PA and it is impossible to rewrite history, neither in the political sense nor in the legal sense. We are now trying stabilize the situation in the West Bank and in Gaza so that we will be able to go to the people and ask for its support."

No, he does not want Israel to help them. Any intervention by it would play into the hands of the rivals.

Are you afraid that Gaza will become a model for the West Bank?

"The question is not relevant, because I do not accept Gaza as a model. The situation in Gaza is reversible. It is possible to change the reality in all of the territories. I am not one of those people who evade responsibility. We have to maintain a dependable government and deal with the corruption, but it is impossible to cast all the blame on us. We are under occupation and the roadblock soldier has more power than a minister in my government. I am not asking anyone for an open check. I am saying that we are prepared and we are serious and just let us function.

"It isn't only a matter of money and donations. People hear about donations here and international conferences and they don't understand what it's all about. On the one hand, they see that you are continuing to build in the settlements and on the other hand they can't move freely in their own territories. This is pathological and it is no wonder that people are losing faith in the peace process."

You have met with Foreign Minister Tzipi Livni several times recently. Do you support her approach to the effect that in order to bring about a change in the situation, the release of prisoners and the dismantling of roadblocks has to be accompanied by negotiations on a final status agreement?

"Prisoners and roadblocks are important things, but the agenda has been captive too long in the hands of these issues. If these things were helpful, so be it, but it hasn't achieved its aim. These issues are not the heart of the conflict, but rather tangential to it. At the same time, it would not be realistic to deal just with the long term and to ignore problems of the short term. It is necessary to deal with both of them at the same time. I was not born yesterday and I know that everyone is asking how anything can move without the security context. When the process fails, bad things happen that cause damage to both sides and also to the international community. We have to make the process immune from hitches. It is possible to do this by building mutual trust that we really are aiming for two states that live in peace.

"So much time and so many lives have gone down the drain on futilities. On 'yes-partner no-partner,' and 'yes-weak not-weak.' You people repeat things so many times that it's hard for you to get free of them. We are partners and we have wasted too much time. Yes, we were weak and we are weak today, too. If you are expecting that we will become a power, you will have to wait for a very long time. It is necessary to decide once and for all whether we want to reach a solution or to make do with continuing to talk about a diplomatic horizon. It is possible to reach an agreement within a reasonable amount of time on the basis of the Arab initiative."

How do we solve the right of return and the mention of United Nations General Assembly Resolution 194 in the Arab League initiative?

"Have the people who are talking about the right of return read the Arab League initiative? They wrote there that the solution has to be agreed upon. Agreed upon with whom? Of course with Israel. This means that the agreement will not exist without the other side. I prefer to deal with finding solutions. We have to move from conflict management to getting the process moving in a serious way. I don't want it to happen that a few years from now people will be scratching their heads and asking why we didn't do this or that, and saying what a pity it is that we didn't take advantage of the opportunity. I fear that we are going to deteriorate back into complacency. The enemies of peace are not sitting around twiddling their thumbs and time is definitely not working to our benefit.? It is impossible to end an interview with a certified economist without an economic question that is troubling many people: Will the small Palestinian state be able to support itself?

Fayad fires his answer from the hip: "Israel is the best proof that the size of a state doesn't matter. Look at the economic miracle you have wrought here. Any state can flourish on condition that it is open to the world not only economically, but also culturally and socially. My vision is a homeland for the Palestinians with territorial contiguity, a state where the inhabitants are proud to be part of the international community."