Israel must tackle the root of its problems and make peace with Palestine

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"Lebanon today, Palestine tomorrow," the placards said yesterday, as Palestinians in their wretched enclave of the Gaza Strip marched in celebration of Israel's withdrawal from south Lebanon. The slogan is, as such slogans sometimes are, both an oversimplification and a reminder of a vital truth. It is a self-deluding oversimplification, because there is simply no way Israel will be forced from the West Bank and Gaza in the same way that it has abandoned territory in Lebanon it had occupied for the best part of two decades. But it also captures the central and enduring truth of the entire Arab-Israeli conflict: that without a settlement between Israel and the Palestinians, the Middle East will never know a proper peace.

"Lebanon today, Palestine tomorrow," the placards said yesterday, as Palestinians in their wretched enclave of the Gaza Strip marched in celebration of Israel's withdrawal from south Lebanon. The slogan is, as such slogans sometimes are, both an oversimplification and a reminder of a vital truth. It is a self-deluding oversimplification, because there is simply no way Israel will be forced from the West Bank and Gaza in the same way that it has abandoned territory in Lebanon it had occupied for the best part of two decades. But it also captures the central and enduring truth of the entire Arab-Israeli conflict: that without a settlement between Israel and the Palestinians, the Middle East will never know a proper peace.

Before the irruption of south Lebanon on to the front pages, negotiations with the Palestinians had also been moving into their own messy endgame, and the immediate outlook was not promising. Secret talks in Stockholm were put on ice by the Israeli cabinet after the worst violence in years on the West Bank, including direct clashes between Palestinian police and Israeli troops. After a clutch of earlier, intermediate deadlines had been missed, there seemed little prospect of meeting the one that really mattered, on 13 September, when agreement was due on the so-called final arrangements covering the trickiest issues, including the status of Jerusalem.

In fact the elements of a compromise are in place. Like most compromises, it will be messy and satisfy neither side entirely, but if a deal is ever to be struck, this - or something very close to it - will be it. Press leaks suggest that Israel will give back not two-thirds, as previously assumed, but 90 per cent of the West Bank. Only a small portion of Palestinian refugees will be allowed to return to the places where they once lived, in pre-1967 Israel, but many of the 1,650 Palestinians held as terrorists in Israeli jails will be released. On Jerusalem, the Israelis will never concede a division of the city; almost certainly, they have made Yasser Arafat their best offer - of the village of Abu Dis, on its edge, as his administrative capital, with some rights of oversight of the Palestinian parts of east Jerusalem.

But all could be blown asunder in the emotional aftermath of Lebanon. Even before the Israeli withdrawal, the emerging deal was fiercely contested. The return of Abu Dis to full Palestinian rule almost wrecked Ehud Barak's coalition and was placed in abeyance after the West Bank rioting. That rioting, meanwhile, was a measure of Palestinian frustration at the unfulfilled promises of the Oslo agreement, seven long years ago, and at Mr Arafat's failure to deliver.

In the wake of the events in Lebanon, the danger is that positions on either side will harden. Palestinians will dream that, like Hizbollah, they can force Israel into retreat. With his credibility damaged and his authority over his own people faltering, Mr Arafat is under immense pressure to step up his demands and, if there is no deal in September, to take the potentially explosive step of a unilateral declaration of Palestinian statehood. After humiliation in Lebanon, however, Israel's mood will be: "Thus far and no further."

Yet it must go further. Even after this week's withdrawal, south Lebanon is a very dangerous place. It will remain so until Israel deals with the root of the problem and makes peace with the Palestinians.

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