The spiral of violence and anger on both sides keeps growing. It is only a matter of time before the next Intifada or war erupts, as more young Palestinians grow up without hope or perspectives. To quote the NY Times Columnist Roger Cohen, "An oppressed people will rise up. That is the nature of things." There is no guarantee that the next conflict will remain restricted to Israel/ Palestine or will remain non-nuclear.
This conflict is not the only one in the Middle East, but a solution would send a strong signal of hope that solutions even for very intractable disputes are possible. Fortunately, both sides overwhelmingly agree on the key aspects of a viable solution: two states within the 1967 borders, with some mutual border adjustments.
This crucial fact soon becomes obvious to anyone who travels, as I have done over the past year, in Israel, the West Bank and Gaza. Most Israelis would willingly give up the settlements for peace. Most Palestinians would accept restrictions on sovereignty, e.g. demilitarization and international peace-keepers, if only the occupation would end, enabling them to live normal lives.
But the mutual distrust has now become so pervasive and deep that no leader on either side can break the deadlock. As in the Balkans in the 1990s, only an imposed solution will work.
This becomes clear when talking with civil society activists and ordinary citizens. They mistrust not only the leaders of the other side, but also potential allies there.
Palestinians fear that any co-operation with Israel-based organisations will make the occupation "look human and civilized". They also mistrust their own leaders' commitment to peace, seeing them as political (and often financial) beneficiaries of the current situation.
The hope that new leaders will appear with the strength to overcome this distrust is an illusion. So is the belief that joint initiatives from below will become strong enough to enforce a solution. Israelis and Palestinians interact daily in many ways. Palestinians - needing to feed their families - even build illegal settlements. Settlers sell products to Palestinians, which the latter are not allowed to import themselves, at inflated prices.
But the dead hand of the occupation makes all interactions superficial and conditional.
This could have been different if Israel had allowed a Palestinian economy to develop, providing at least economic hope. But there is no functioning Palestinian economy. Every sector of life remains under Israeli de jure or de facto control. Every concession given can be withdrawn at any time at the whim of an Israeli soldier. The Palestinian Authority (PA) has been given the responsibilities of a state but none of the rights. This charade has now continued for over 20 years, made possible by EU and other funding.
Last year the World Future Council sent an expert delegation to Ramallah to advise on the best ways of introducing a Palestinian currency. We met with key Palestinian officials, bankers, entrepreneurs and academics. Such a currency would be in accordance with the Paris protocol and international law. It would have several advantages for the Palestinian economy: reducing exchange costs, ensuring that seigniorage profits from money creation stay in Palestine, and contributing to greater economic flexibility. It would enable the respected Palestinian Monetary Authority (PMA) to become a central bank, a lender of last resort to the banking sector which could also spend directly into the economy. Such spending would not be inflationary if it enabled unused productive facilities and the many unemployed Palestinians to produce new goods and services.
This currency would not need to be physically backed, e.g. by gold. Money is backed by the trust that it can be re-used and maintain its value. If Palestinian taxes and wages were set in it, its use would be immediate and widespread.
But it became clear to us that the PA does not have the minimum powers required to make this work. Proposals for strengthening the Palestinian economy ignore the key fact that the PA has no authority over imports, exports or resources. Every concession it has been given can be blocked or taken back tomorrow by Israel. Agreements are implemented selectively to only favour Israel. Palestinian exports are delayed and sabotaged. The Palestinian economy remains a fully dependent subset of the Israeli economy. If there is a dispute, Israel refuses arbitration.
The importation of many products is banned, forcing Palestinian entrepreneurs to use more expensive Israeli manufacturers. To quote a Palestinian entrepreneur, Israel keeps all the profits and transfers all the costs.
This equally applies in politics. The PA has the symbols and duties which make it appear sovereign, but not the power to create a functioning state. It remains dependent on foreign donors for its existence who use it to uphold the illusion of progress towards a two-state solution.
While daily life in the West Bank is not as harsh as in Gaza, farmers there are being harassed by settlers who beat them, cut their olive trees, poison their crops and set dogs on them. The Israeli army operates freely even in Area A, which is officially under full Palestinian security control.
It is only a matter of time before popular anger forces the PA to end its security co-operation with Israel. Alternatively, the PA may declare it cannot function anymore, because Israel refuses to hand over the taxes collected on its behalf in reprisal for Palestine joining the ICC.
The international community now needs to set a timetable for Israel to end the siege of Gaza and withdraw to the 1967 borders (with minor mutual adjustments), or face punitive sanctions. This has worked in S. Africa and elsewhere. It will set in motion a process of building mutual trust because the rule of international law is finally enforced -- and seen to be enforced!
It will send a strong signal to Israel that it cannot claim the rights of a civilized nation while ignoring its legal obligations.
Europe must take the lead in setting such a time-table as the pro-Israel lobby will not allow the USA to do so. In the EU on the other hand, popular opinion would strongly back such an initiative.
Of course, there would be the usual accusations of anti-Semitism. But, to quote the Israeli historian Moshe Zuckermann, "Nowhere in the world is a Jew in greater danger than in Israel." Ending the Israeli occupation is the best antidote to anti-Semitism, which can then no longer hide behind anti-Zionism.
Time is now rapidly running out for a two-state solution -- the only way to maintain a Jewish-majority state. Time is also running out for the credibility of the West and of a global order based on international law. "How can you speak of common human values after you have been to Gaza?", a young student asked me at a talk I gave recently. She was right.