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The Palestinian factions have reached a power-sharing deal - albeit a fragile one. Regional developments helped, affecting the calculations of both Fatah and Hamas. The role of post-Mubarak Egypt and its emerging independent regional policy cannot be underestimated. Israel's current government, though, is key to the glue binding Fatah and Hamas together. While the peace process has long been moribund, the Netanyahu government's refusal to indulge in the make-believe of possible progress rendered obsolete even Fatah's well-honed capacity to suspend disbelief.

Yet if the deal is to last, the Palestinian factions will eventually have to address substance: their national goals and the strategies to be pursued in attaining them. A real political dialogue will force both Fatah and Hamas out of their respective comfort zones. Fatah will have to elaborate a post-negotiation and (one imagines ) non-violent plan for freedom, and decide how such a plan co-exists or breaks with existing donor and international relations, including coordination with Israel. Hamas will have to confront the requirements of international law (including abandoning the use of violence against civilians ), and ultimately resolve its own verbal acrobatics regarding a Palestinian state alongside Israel - if a serious deal becomes available.

Not surprisingly, unity is also popular in Israel. Israeli unity that is. Palestinian unity has been met with almost blanket condemnation at the political level. But in reacting to Palestinian developments, we Israelis should first of all be asking what the problem is that we need to address. For the Netanyahu government that major problem, apparently, is Israel's international image and the prospect of pressure being exerted on Israel to advance peace. In the community of nations, Israel's standing has further plummeted under the tutelage of Foreign Minister Avigdor Lieberman. The intra-Palestinian deal therefore offers a delightful opportunity for Israel to register some big points on the "Who's to blame for no peace?" scorecard and to fend off any such pressure.

Israel's challenge, though, goes way beyond public relations. Israel's challenge is how to adapt, shape and secure its future in this region.

For that reason alone, we would benefit from our own national reconciliation dialogue, one focused on what Israel's aspirations and strategies should look like.

As tectonic plates shift around us, Israel is clinging to an illusion, namely that when and if the Palestinians are ready, Israel will be able and willing to deliver a dignified two-state solution. The truth is less comforting. Currently there is no political path to an Israeli governing majority that could deliver a mutually acceptable two-state outcome. And there is no status quo: Israel's predicament is deteriorating, not stable. It is time for Israel to engage in the exercise that Palestinians have begun, and to ask what it is that we really want for ourselves.

Such a conversation might go in a number of directions.

Perhaps, in an honest dialogue regarding our future, enough of a consensus could be reached to allow for the actual evacuation of at least 100,000 settlers, a withdrawal from the vast majority of the West Bank and East Jerusalem, and agreement on a two-state border delineation (with equal land swaps ), even as other outstanding issues and a full end to conflict are left to future state-to-state negotiations.

A second option could be to build on the above, taking it in a more challenging direction - that of a full truth and reconciliation process with the Palestinians, addressing all claims. That would necessitate a difficult preliminary phase of Israeli introspection - are we ready to come to terms with the Nakba, with sharing Jerusalem's holy sites, and with being a fully democratic state, including for our Palestinian citizens?

If significant settler evacuation has become a red line that is impossible for Israel's political realities to cross, and alongside that a two-state solution is still preferred, then a third set of possibilities come into play. Israelis might develop a sufficient consensus that, while being unwilling to uproot fellow citizens, we are still willing to cede sovereignty over the '67 Palestinian territories. One might then enter into a negotiation over the rights and responsibilities of former settlers as residents in Palestine and what Israel would offer in exchange for these arrangements.

Alternately, we could pursue the two-ethnic-states model to its logical conclusion and call for a border that would be a modern-day version of the 1947 partition plan - and probably closer to a 50-50, rather than a 78-22, divide on the percentage of territory. This would be an intellectually honest platform for Lieberman's party.

If Israel cannot remove settlers, cannot engage in a genuine truth and reconciliation process, cannot cede sovereignty on the '67 lines to the Palestinians, or ask the United Nations to re-partition Palestine, then we must be honest and translate the existing one-space reality into a political plan for a one-state democracy - whether on the basis of a federal system, a cantonal system, a binational democracy, or a still more creative formulation. Perhaps just having such a conversation will help generate a governing majority for the more conventional two-state outcome, perhaps not. The more we avoid this conversation, the more we endanger our future in this democratizing region, and the more we entrench a reality of apartheid-by-stealth.

It is doubtful that such a conversation can evolve without an external impetus. It took Egyptian intervention to revive a serious Palestinian national dialogue. Is it too much to suggest that our American ally, apparently politically unable to lead a solution, could at least help lead a conversation?

Daniel Levy directs the Middle East Taskforce at the New America Foundation and is an editor of the Middle East Channel at foreignpolicy.com.