Prime Minister Benjamin Netanyahu has announced Israel is ready to endorse creation of a Palestinian state as long as it is demilitarised and the Palestinians accept that Israel is a Jewish state. Here are key excerpts from his major policy speech delivered on 14 June, 2009.
The key condition is that the Palestinians recognise in a clear and public manner that Israel is the state of the Jewish people. The heart of the conflict has always been the Arabs' refusal to accept the existence of the Jewish state.
If we have guarantees on demilitarisation and if the Palestinians recognise Israel as a state of the Jewish people, then we arrive at a solution based on a demilitarised Palestinian state alongside Israel.
Each will have its flag, each will have its anthem. The Palestinian territory will be without arms, will not control airspace, will not be able to have arms.
I call on you, our Palestinian neighbours, and to the leadership of the Palestinian Authority - let us begin peace negotiations immediately, without preconditions. Israel is committed to international agreements and expects all the other parties to fulfil their obligations as well.
I appeal, from here this evening, to the leaders of the Arab states and say - Let's meet. Let's talk peace. Let's make peace. I am willing to meet with you any time, any place - in Damascus, in Riyadh, in Beirut.
We have no intention of building new settlements or of expropriating land for new settlements. But there is a need to allow settlers to lead normal lives, to allow mothers and fathers to raise their children like all families around the world.
The refugee problem must be solved outside of Israeli borders. Their return goes against the principle of Israel as a Jewish state. I believe that with goodwill, and international investment, this humanitarian problem can be solved once and for all.
TERRITORIAL HANDOVERS BY ISRAEL
Many a worthy person has told us that withdrawal is the key to peace between us and the Palestinians... but the fact is that every withdrawal has been accompanied by rockets and suicide attacks.
That claim purporting that withdrawal will bring peace with the Palestinians, or at least bring it closer, has so far not been borne out in practice.
Israel needs defensible borders and Israel's capital, Jerusalem, will remain united.
PALESTINIAN AUTHORITY PRESIDENT ABBAS V HAMAS
They must decide between the way of peace and the way of Hamas. The Palestinian Authority must impose law and order... and overcome Hamas. Israel will not negotiate with terrorists trying to destroy it.