Abir Dandis, the mother of the two girls who were murdered in the Negev town of Al-Fura’a last week, couldn't find a police officer to listen to her warnings, neither in Arad nor in Ma’ale Adumim. Both police stations operate in areas where Israel wants to gather the Bedouin into permanent communities, against their will, in order to clear more land for Jewish communities. The dismissive treatment Dandis received shows how the Bedouin are considered simply to be lawbreakers by their very nature. But as a resident of the West Bank asking for help for her daughters, whose father was Israeli, Dandis faced the legal-bureaucratic maze created by the Oslo Accords.

The Palestinian police is not allowed to arrest Israeli civilians. It must hand suspects over to the Israel Police. The Palestinian police complain that in cases of Israelis suspected of committing crimes against Palestinian residents, the Israel Police tend not to investigate or prosecute them.

In addition, the town of Al-Azaria, where Dandis lives, is in Area B, under Palestinian civilian authority and Israeli security authority. According to the testimony of Palestinian residents, neither the IDF nor the Israel Police has any interest in internal Palestinian crime even though they have both the authority and the obligation to act in Area B.

The Palestinian police are limited in what it can do in Area B. Bringing in reinforcements or carrying weapons in emergency situations requires coordination with, and obtaining permission from, the IDF. If Dandis fears that the man who murdered her daughters is going to attack her as well, she has plenty of reason to fear that she will not receive appropriate, immediate police protection from either the Israelis or the Palestinians.

Dandis told Jack Khoury of Haaretz that the Ma’ale Adumim police referred her to the Palestinian Civil Affairs Coordination and Liaison Committee. Theoretically, this committee (which is subordinate to the Civil Affairs Ministry) is the logical place to go for such matters. Its parallel agency in Israel is the Civilian Liaison Committee (which is part of the Coordination and Liaison Administration - a part of the Civil Administration under the Coordinator of Government Activities in the Territories).

In their meetings, they are supposed to discuss matters such as settlers’ complaints about the high volume of the loudspeakers at mosques or Palestinians’ complaints about attacks by settlers. But the Palestinians see the Liaison Committee as a place to submit requests for permission to travel to Israel, and get the impression that its clerks do not have much power when faced with their Israeli counterparts. In any case, the coordination process is cumbersome and long.

The Palestinian police has a family welfare unit, and activists in Palestinian women’s organizations say that in recent years, its performance has improved. But, as stated, it has no authority over Israeli civilians and residents. Several non-governmental women’s groups also operate in the West Bank and in East Jerusalem, and women in similar situations approach them for help. The manager of one such organization told Haaretz that Dandis also fell victim to this confusing duplication of procedures and laws. Had Dandis approached her, she said, she would have referred her to Adalah, the Legal Center for Arab Minority Rights in Israel, which has expertise in navigating Israel’s laws and authorities.

John Kerry revealed his long-awaited plan for peace in the Middle East on Sunday, hinging on a $4bn (£2.6bn) investment in the Palestinian private sector.

The US secretary of state, speaking at the World Economic Forum on the Jordanian shores of the Dead Sea, told an audience including Israeli president Shimon Peres and Palestinian leader Mahmoud Abbas that an independent Palestinian economy is essential to achieving a sustainable peace.

Speaking under the conference banner "Breaking the Impasse", Kerry announced a plan that he promised would be "bigger, bolder and more ambitious" than anything since the Oslo accords, more than 20 years ago.

Tony Blair is to lead a group of private sector leaders in devising a plan to release the Palestinian economy from its dependence on international donors. The initial findings of Blair's taskforce, Kerry boasted, were "stunning", predicting a 50% increase in Palestinian GDP over three years, a cut of two-thirds in unemployment rates and almost double the Palestinian median wage. Currently, 40% of the Palestinian economy is supplied by donor aid.

Kerry assured Abbas that the economic plan was not a substitute for a political solution, which remains the US's "top priority".

Peres, who had taken the stage just minutes before, also issued a personal plea to his Palestinian counterpart to return to the negotiations.

"Let me say to my dear friend President Abbas," Peres said, "Should we really dance around the table? Lets sit together. You'll be surprised how much can be achieved in open, direct and organised meetings."

Thick locks hug the front gates of shuttered shops, now covered in graffiti and dust from lack of use. Only a handful of customers pass along the dimly lit road, sometimes stopping to check the ripeness of fruits and vegetables, or ordering meat in near-empty butcher shops.

“All the shops are closed. I’m the only one open. This used to be the best place,” said 64-year-old Mustafa Sunocret, selling vegetables out of a small storefront in the marketplace near his family’s home in the Muslim quarter of Jerusalem’s Old City.

Amidst the brightly coloured scarves, clothes and carpets, ceramic pottery and religious souvenirs filling the shops of Jerusalem’s historic Old City, Palestinian merchants are struggling to keep their businesses alive.

Faced with worsening health problems, Sunocret told IPS that he cannot work outside of the Old City, even as the cost of maintaining his shop, with high electricity, water and municipal tax bills to pay, weighs on him.

“I only have this shop,” he said. “There is no other work. I’m tired.”

Abed Ajloni, the owner of an antiques shop in the Old City, owes the Jerusalem municipality 250,000 Israeli shekels (68,300 U.S. dollars) in taxes. He told IPS that almost every day, the city’s tax collectors come into the Old City, accompanied by Israeli police and soldiers, to pressure people there to pay.

“It feels like they’re coming again to occupy the city, with the soldiers and police,” Ajloni, who has owned the same shop for 35 years, told IPS. “But where can I go? What can I do? All my life I was in this place.”

He added, “Does Jerusalem belong to us, or to someone else? Who’s responsible for Jerusalem? Who?”

Illegal annexation

Israel occupied East Jerusalem, including the Old City, in 1967. In July 1980, it passed a law stating that “Jerusalem, complete and united, is the capital of Israel”. But Israel’s annexation of East Jerusalem and subsequent application of Israeli laws over the entire city remain unrecognised by the international community.

Under international law, East Jerusalem is considered occupied territory – along with the West Bank, Gaza Strip and Syrian Golan Heights – and Palestinian residents of the city are protected under the Fourth Geneva Convention.

Jerusalem has historically been the economic, political and cultural centre of life for the entire Palestinian population. But after decades languishing under destructive Israeli policies meant to isolate the city from the rest of the Occupied Territories and a lack of municipal services and investment, East Jerusalem has slipped into a state of poverty and neglect.

“After some 45 years of occupation, Arab Jerusalemites suffer from political and cultural schizophrenia, simultaneously connected with and isolated from their two hinterlands: Ramallah and the West Bank to their east, West Jerusalem and Israel to the west,” the International Crisis Group recently wrote.

Israeli restrictions on planning and building, home demolitions, lack of investment in education and jobs, construction of an eight-foot-high separation barrier between and around Palestinian neighbourhoods and the creation of a permit system to enter Jerusalem have all contributed to the city’s isolation.

Formal Palestinian political groups have also been banned from the city, and between 2001-2009, Israel closed an estimated 26 organisations, including the former Palestinian Liberation Organisation headquarters in Jerusalem, the Orient House and the Jerusalem Chamber of Commerce.

Extreme poverty

Israel’s policies have also led to higher prices for basic goods and services and forced many Palestinian business owners to close shop and move to Ramallah or other Palestinian neighbourhoods on the other side of the wall. Many Palestinian Jerusalemites also prefer to do their shopping in the West Bank, or in West Jerusalem, where prices are lower.

While Palestinians constitute 39 percent of the city’s population today, almost 80 percent of East Jerusalem residents, including 85 percent of children, live below the poverty line.

“How could you develop [an] economy if you don’t control your resources? How could you develop [an] economy if you don’t have any control of your borders?” said Zakaria Odeh, director of the Civic Coalition for Palestinian Rights in Jerusalem, of “this kind of fragmentation, checkpoints, closure”.

“Without freedom of movement of goods and human beings, how could you develop an economy?” he asked.

“You can’t talk about independent economy in Jerusalem or the West Bank or in all of Palestine without a political solution. We don’t have a Palestinian economy; we have economic activities. That’s all we have,” Odeh told IPS.

Israel’s separation barrier alone, according to a new report by the United Nations Conference on Trade and Development (UNCTD), has caused a direct loss of over one billion dollars to Palestinians in Jerusalem, and continues to incur 200 million dollars per year in lost opportunities.

Israel’s severing and control over the Jerusalem-Jericho road – the historical trade route that connected Jerusalem to the rest of the West Bank and Middle East – has also contributed to the city’s economic downturn.

Separation of Jerusalem from West Bank

Before the First Intifada (Arabic for “uprising”) began in the late 1980s, East Jerusalem contributed approximately 14 to 15 percent of the gross domestic product (GDP) in the Occupied Palestinian territories (OPT). By 2000, that number had dropped to less than eight percent; in 2010, the East Jerusalem economy, compared to the rest of the OPT, was estimated at only seven percent.

“Economic separation resulted in the contraction in the relative size of the East Jerusalem economy, its detachment from the remaining OPT and the gradual redirection of East Jerusalem employment towards the Israeli labour market,” the U.N. report found.

Decades ago, Israel adopted a policy to maintain a so-called “demographic balance” in Jerusalem and attempt to limit Palestinian residents of the city to 26.5 percent or less of the total population.

To maintain this composition, Israel built numerous Jewish-Israeli settlements inside and in a ring around Jerusalem and changed the municipal boundaries to encompass Jewish neighbourhoods while excluding Palestinian ones.

It is now estimated that 90,000 Palestinians holding Jerusalem residency rights live on the other side of the separation barrier and must cross through Israeli checkpoints in order to reach Jerusalem for school, medical treatment, work, and other services.

“Israel is using all kinds of tools to push the Palestinians to leave; sometimes they are visible, and sometimes invisible tools,” explained Ziad al-Hammouri, director of the Jerusalem Centre for Social and Economic Rights (JCSER).

Al-Hammouri told IPS that at least 25 percent of the 1,000 Palestinian shops in the Old City were closed in recent years as a result of high municipal taxes and a lack of customers. “Taxation is an invisible tool…as dangerous as revoking ID cards and demolishing houses,” he said. “Israel will use this as pressure and as a tool in the future to confiscate these shops and properties.”

Lally Weymouth of Newsweek and The Post interviewed Israeli Prime Minister Benjamin Netanyahu in Jerusalem.

Q: What did you think of the Goldstone report?

A: I thought there were limits to hypocrisy but I was obviously wrong. The so-called human rights commission accuses Israel that legitimately defended itself against Hamas of war crimes. Mind you, Hamas didn't commit just one type of war crime. It committed four. First, they called for the destruction of Israel, which under the U.N. Charter is considered a war crime -- incitement to genocide; secondly, they fired deliberately on civilians; third, they hid behind civilians; and fourth, they've been holding our captured soldier, Gilad Shalit, without access to the Red Cross, for three years.

And who gets accused of criminal behavior at the end of the day? Israel that sent thousands of text messages and made tens of thousands of cellular phone calls to Palestinian civilians [to warn them to evacuate]. This inversion of justice is patently absurd.

People here appear to feel the Goldstone report is very unfair, but some have called for an internal inquiry. What is your position?

We've had 26 allegations investigated. Not because of the U.N. decision but because this is our procedure. We've investigated people for wrong behavior. We've put people on trial in the past because we're a functioning democracy. We'll do it in this case too. But what the Goldstone report actually accuses Israel of is deliberately targeting civilians, which is patently false.

So you're not in favor of an independent inquiry?

We're looking into that not because of the Goldstone report but because of our own internal needs.

The best way to defuse this issue is to speak the truth because Israel was defending itself with just means against an unjust attack. Serious countries have to think about adapting the laws of war in the age of terrorism and guerrilla warfare. If the terrorists believe they have a license to kill by choosing to kill from behind civilian lines, that's what they'll do again and again. What exactly is Israel supposed to do?

That's why you think the report is so dangerous?

This gives terrorist regimes a new weapon against democracies and even against non-democracies -- it allows them to attack entire cities with weapons of mass terror and get away with it simply because they fire the rockets from populated areas. In the case of Hamas, they deliberately targeted civilians while hiding behind civilians. So our attempted surgical strikes would be attacked as [acts of] war criminals. There's a world of difference between the incidental civilian casualties that are tragic in any war and the deliberate targeting of civilians.

Now [comes] the new tactic, which is the deliberate targeting of civilians while using civilians as a human shield. A double war crime. [But] the U.N. commission in Geneva added insult to injury by condemning Israel. It's a complete inversion of the facts, which is more[or] less what this report does. It just stands truth and justice on its head. So the simplest way to deal with this [report] is to tell the truth. The United States did that with great clarity.

Were you surprised that some of the other countries like Great Britain and France did not support Israel?

I think all countries should stand up that are themselves engaged in the war against this brutal terror. Moral clarity is the most important weapon against terror.

What did you think of the Geneva deal that the Obama administration and other Western countries appear to have struck with Iran?

It's too early to say because the crucial thing is that the international community pressure Iran to stop the enrichment of uranium, which has only one purpose. Iran is swimming in oil. The purpose of enrichment is the development of nuclear-weapons capability so any solution has to be accompanied by the cessation of enrichment.

Some U.S. experts argue that this deal is a reversal of past policy, which was based on freezing enrichment.

I think the cessation of enrichment should be the policy.

Someone told me this week that you believe it is your duty as prime minister to prevent a second holocaust of the Jewish people.

This has been the sentiment of all the prime ministers of Israel.

But do you feel it particularly in light of the Iranian nuclear threat?

I think right now the issue is not merely the security of Israel but of the world. Free and open societies are menaced by a dark radicalism that is seeking to arm itself and its proxies with nuclear weapons.

You're speaking of Iran?

Yes. We're definitely the first country threatened but definitely not the last.

Your Arab neighbors say that they are very concerned, too.

There is not, perhaps with one exception [and] I'm not even sure about that one, a single Arab country that is not concerned by the possibility of a nuclear Iran. And of course, many of the great powers in Europe understand the danger. This would be a pivot of history if it happened.

Is there a lot of time for you to deal with this issue?

It's not we [Israel], it's we the international community. I've spoken about it to President Obama, and he assured me that the goal of the United States is to prevent Iran from acquiring nuclear weapons.

Reportedly, Israel might be preparing for a strike against Iran.

I'm not responsible for rumors. Our belief is that this is a global problem. Since it's the problem of the international community, the international effort led by the United States is the way to stop this danger.

What do you think should happen with the Palestinians?

We just wasted six months because of the Palestinian effort to place preconditions on the negotiations -- preconditions that weren't there for the last 16 years.

Is that freezing the settlements?

It's freezing the settlements, it's committing in advance to the results of the negotiations.

It's committing to the outcome basically?

Yes, it's the old technique. Let's agree on what the results of the negotiations will be before the negotiations begin.

Didn't the U.S. get the Palestinians' hopes up by saying there should be a settlement freeze?

I think the Palestinians have to recognize [that] Washington says there should be negotiations without preconditions. That's what they mean. And that's certainly what we mean. We're prepared to begin yesterday. Why waste more time?

Shimon Peres told me that you are mistakenly viewed as a right-winger. Peres said you've done much more than any previous prime minister [by freezing settlements].

I think we do represent a consensus of the Israeli public. I think what we've done in the last six months is to consolidate a great part of the Israeli body politic around certain clear principles that will enable us to achieve peace. If I had to sum it up I'd say that the beginning of the peace negotiations should be without preconditions and the outcome of the negotiations should be a demilitarized Palestinian state that recognizes the Jewish state.

That brief sentence encompasses the gist of the problem and the gist of the solution. The gist of the problem is that for 62 years the Palestinians have refused to recognize Israel as the nation state of the Jewish people.

Because while it is the nation state of the Jews, all the non-Jews that live here have full civil rights, participating in the Knesset and the government. I think recognizing Israel as the nation state of the Jewish people is a minimal requirement for achieving a truly successful conclusion. Because just as we're asked to recognize a nation state for the Palestinians, the Palestinians must recognize Israel as the nation state of the Jewish people.

The Palestinians say they've recognized Israel, but now they have to recognize it as a Jewish state.

That's right. Israel is not a bi-national state. It has non-Jews who live here with full, equal rights, but it has two things that assure its special character. It's the homeland of any Jew. And there is a very broad consensus in Israel that the Palestinian refugee problem should be resolved outside Israel's borders. Jews come here and Palestinians will go there. So choose. That's the basis of a solution.

I gave a speech at Bar-Ilan University in which I said what I've said to you here. It wasn't easy but I did it. There has yet to be a Palestinian leader who actually turns to his people and says -- it's over. We're not going to have a state that will continue to make demands on Israel. It's over. We recognize that Israel is the Jewish state just as we ask the Israelis to recognize the Palestinian state.

And that's why it's important?

That's why it's essential. Because why is this conflict going on for 62 years?

It raged for almost 30 years before the establishment of the state of Israel. The popular explanation is that this conflict is about the territories captured in the 1967 war. So why did the conflict rage [when] there were no settlements? The Arabs fought wars and terror campaigns in the 1920s, '30s and '40s against any Jewish state, and then they rejected the partition. Our presence in the territories is not the cause of the conflict but one of its results. What Arab propaganda has done is to turn around cause and effect. The cause is the persistent Palestinian refusal to recognize the Jewish state at any point.

We left Gaza, we left Lebanon -- every square inch of it. And they fire rockets into the Galilee and say this is occupied Palestine. And of course the world community is not sensitive to that and says you mean, the West Bank. They say, No, we don't mean the West Bank. Of course we want the West Bank but we want Tel Aviv, Jaffa and all of Jerusalem. It's the persistent refusal to recognize Israel in any boundaries, and I'm not talking about Hamas. I'm talking about the moderates who have to turn around to their people and say "it's over" when they make peace. . . . We will end the conflict by establishing a state. That simple truth requires a lot of courage from the Palestinian leadership. They have to stand up and say we will make a final peace with the Jewish state of Israel. Courage is required on both sides.

What do you think of President Obama?

There is much greater cooperation and transparency between the Obama administration and my government than people know. We speak openly and I greatly appreciate steps taken by the Obama administration against the distorted Goldstone report and their pressure on Iran to stop its military nuclear program as well as the ongoing efforts we are making to re-launch the peace negotiations between us and the Palestinians.

Lally Weymouth of The Post and Newsweek interviewed Palestinian Prime Minister Salam Fayyad this week in Ramallah. Excerpts:

Q: So you have a plan to create institutions and a state within two years?

We've committed ourselves to a path of completing the task of institution building. [This means] the capacity to govern ourselves effectively in all spheres of government within two years.

So does that mean a central bank, roads?

It means all of that. We now have a monetary authority that is almost like a central bank. We have a public financial system that is well managed. It has won the confidence not only of the Palestinian people but certainly of our donors, including especially the United States.

What are the other institutions?

We are talking about security capability, law and order, including a well-functioning judiciary. Security is not complete unless there is a widespread belief on the part of the public that there is due process. . . .

Additionally, [we need] physical infrastructure to provide services effectively to our people in all areas -- social services, health, education. . . . The idea behind this is to ensure that in a couple of years, it will not be difficult for people looking at us from any corner of the universe to conclude that the Palestinians have a state.

Do you think you should declare a state in 2011?

I said this will be the program of the Palestinian government -- it will commit itself to deliver the state in terms of capacity within two years. That is new in Palestinian politics. Usually, when you have a new government, the norm is for the government to say, here is our plan, a wish list of things -- not a real plan.

People have compared you to the early Zionists, who built institutions.

I keep telling people, Israel was not created in 1948. Israel was proclaimed as a state in 1948. The institutions of the state were there before 1948.

We look . . . to establish Palestine as an independent, democratic, progressive and modern Arab state, with full sovereignty over its territory, the West Bank and Gaza in the 1967 borders, with East Jerusalem as its capital. Palestine will reject violence, commit to coexistence with its neighbors.

You're not a member of Fatah, are you?

No, I'm not.

But do you think of yourself as the Ben Gurion of the Palestinian people?

What I really want is for people to believe that this can happen. . . . We, more than anyone else, need good government. You know, let's get on with it. To the extent that poor governance was used as a disqualifier, by doing it right, this is an instrument of liberation.

In mid-2007, I took over. I say to people, Two years ago I came to you and talked about this. I can understand it if some of you thought, 'Sounds good, but it's not going to happen.' But here we are. This school is there. The water pump is [working]; electricity is on. And just as one school happened, the next one will happen.

How closely do you work with the Israeli government?

There are different layers of dealing with the Israelis. On day-to-day matters, Israel controls the boundaries, the points of access.

If you are talking about Israelis doing things to help us implement this plan, I think the record on this is mixed. To be able to do what we are doing, we need to be enabled to do it. . . . You need to be able to move. It took too long in my view before the Israeli government started to respond by easing restrictions on movement.

. . . What I would say to the Israelis is: 'Do not wait another two years before dismantling all of these restrictions.' . . . Let's create a critical mass of change, positive change on the ground to make it possible for us to move around to implement those projects in the areas where the state of Palestine is going to emerge.

It must include the Jordan Valley and what else?

The so-called Area C [controlled totally by Israel], including the Jordan Valley. We are not able to generate adequate resources because our economy is shackled by these restrictions.

I thought the economy was growing at something like 8 percent?

If not even more. It's very good.

. . . But the question is, is this sustainable?

. . . The state we are looking for is not one that is perpetually dependent on aid. It is not realistic to expect the world to continue to pour cash in.

Do you think the Goldstone report is unfair?

The report was presented to the Human Rights Council in Geneva. I think it should be considered on merit. . . . I think that there really has to be serious consideration of whether or not the community of nations is serious enough about a code of conduct that governs everybody.

Does Abu Mazen and do you have ongoing contacts with Israeli counterparts?

Those contacts were regular up until the re-launching of the political process was considered as requiring certain things to happen -- chiefly among those, a settlement freeze.

But isn't it true that no Israeli prime minister has ever frozen settlements?

Again, this has been taken up as an issue because there is this current prime minister. It might have been a lot timelier to insist on this condition back when Oslo was signed.

Surely [Yasser] Arafat could have accepted then-Prime Minister [Ehud] Barak's offer?

It seems like the Palestinians are always turning down deals. . . . We end up kind of in a corner and it looks like it's our fault it didn't happen. A case in point is what happened in the settlement business.

. . . I think it's important for there to be a freeze. How can people continue to buy into this process if they continue to see more settlement activity coming at the expense of expropriation of Palestinian land?

Are you willing to agree to no right of return [for Palestinian refugees]?

Refugees is one of those final-status issues that were set aside in 1993-4 for a political process to deal with. And I view what is said about that as an effort to have what you might call prior conditions. This is like preempting even a discussion on this issue.

King Abdullah of Jordan sat down at Petra with NEWSWEEK's Lally Weymouth last week and reflected on the state of affairs in his part of the world. He emphasized the need for a settlement of the Palestinian issue and claimed that Iran was no longer such a big problem for his country. Indeed, he sounded a bit like Barack Obama in arguing for the need for dialogue with Iran—a country he has in the past described as a major threat. Excerpts:

Weymouth: Is Annapolis dead?

Abdullah: I'm actually very concerned … I think the peace process has lost credibility in people's minds in this area ... We're all very pessimistic at this stage.

Do you view Iran as the No. 1 threat in this region?

I think the lack of peace is the major threat. I don't see the ability of creating a two-state solution beyond 2008, 2009. I think this is really the last chance ... I am very concerned that the clock is ticking and that that door is closing on all of us.

But aren't you concerned about Iran?

Iran poses issues to certain countries, although I have noticed over the past month or so that the dynamics have changed quite dramatically. For the first time, I think Iran is less of a threat. But if the peace process doesn't move forward, then I think that extremism will continue to advance.

When it comes to Iran, I am quite supportive of what I see in Europe and the West—people who want to engage.

There are certain candidates in the U.S. election who've been calling for dialogue with Iran.

We're a country and a region that supports dialogue as opposed to conflict. If there is conflict with Iran, I'm not too sure where this is going to lead us. I think you're playing with Pandora's box … I think we've had enough crises in this part of the world.

Do you feel that you've been too loyal and staked too much on President Bush, on the Americans?

I think that since day one, the president and I have been very, very honest and very candid on regional issues, and I've always expressed my views on the different countries that surround us and how we need to approach them. Advice is worth what you pay for it at the end of the day.

How do you see things in Iraq today?

I am actually optimistic for the first time on Iraq. I think that Iraqi society is moving in the right direction. It's the first time that I have felt that Iraqis have, as much as they can, bound themselves together into a unity. They have worked together—Kurds, Shiites and Sunnis—for the betterment of Iraq in the last couple of months. Here's an opportunity for Arab countries to reach out, which we haven't done in the past, and extend a hand of friendship to the Iraqis and give them the support that they need to get to the next step. If we don't, I think that it will be a loss for the Iraqis and for the Arab moderates.

Lally Weymouth also spoke with Palestinian Prime Minister Salaam Fayyad in Ramallah.

Excerpts:

Q. Did you [think] it was possible to do anything with [Yasser] Arafat?

A. There is hardly anything I did here that was easy. Changing the way business is done in finance in the PA was not easy. You just didn't know where to begin.

Was it possible to do anything with the PA?

Yes, it was. This is fairly well documented. We did quite a few things in a relatively short period of time.

So what did you decide to do?

I knew what was wrong with the system. I wanted to get the basics right. And that's what I focused on. Having one treasury, one financial address for the PA, not several different centers for sending money. Revenues had to go to one place.

How did Arafat accept that idea?

He was accepting of it. Most of the fundamental reforms that were essential for getting the system right . . . happened in my first term as finance minister. They were pretty much done by 2005. . . . We started to do things right and also have one treasury . . . one financial address for the PA. . . . Donors confidence started to rise. They started to send us money directly. The system became transparent. We launched a Web site on which we posted our budget.

The PA was supposed to be so corrupt.

Yes, reform isn't without opposition, of course. You do what you can in situations like this. You move as fast as you possibly can. The program started to acquire a reputation of its own. But then I had the backing. I began to develop a constituency. Then last June there was the violent takeover of Gaza.

And you left Gaza?

Yes. First I served under Abu Amar and then Abu Mazen, beginning in January 2005. And then [in] late 2005 I resigned as finance minister. I ran for elections of the PLC.

Did you get elected?

Yes, I got elected. I wanted to do something different. . . . You know what happened in the elections of 2006. . . .

Hamas?

Yes. Hamas came in and that lasted about half a year. Then I rejoined the government as finance minister in a national unity government in March 2006, which lasted three months. I found the system pretty much in ruins.

After Hamas was elected, there was an international boycott. Donors wanted to take care of the humanitarian needs of the Palestinian people but did not want to do so through the government.

They wanted to extend assistance to the Palestinian people but not to go through the Ministry of Finance. As a consequence of all of this, the system became highly fragmented and there was no single address for spending. So, to answer the most basic question, how much assistance did you get last year, you really don't know. The one thing countries should be able to tell you is how much they received in donations. But a lot of money came in cash to Hamas. Iran gave money to the government. When things do not come through banks, how can you do proper accounting? So for three months we tried our best to fix things. The public finance system was totally in ruins.

Then, the government collapsed and there was the violent takeover by Hamas in June 2007.

Q. When did you become prime minister?

A. In June 2007 I was sworn in.

Do you blame the Americans for pushing the election in which Hamas won?

No. From what I remember, everyone, myself included, pushed for elections to be inclusive. In other words, not to exclude any party.

So how do you explain Fatah's loss ?

The PA [Palestinian Authority] had been around for a long time. . . . There was dissatisfaction with the way the PA had governed. You had a newcomer running against the system. They claim to be clean, they claim Fatah is corrupt.

Is it true that Fatah was corrupt?

The PA clearly didn't manage properly throughout. It does not really have to be a clear case of impropriety for there to be strong public opinion against a sitting authority. The context in which we live, occupation and checkpoints, people don't like that. Another is the failings of the peace process. In the early '90s, expectations were high, but then there was setback after setback.

But when you were sworn in, you spoke out against violence and incitement.. . . What did you say?

Essentially, that the party is over. Places of worship are places of worship. Religion is about tolerance, religion is not about incitement. [Incitement] is not going to be allowed. It was something I did out of deep conviction. It was evident we were not on the right path. We needed to change the mind-set of people in the midst of extreme adversity.

What was the reaction?

They complied. For the Authority to govern, there have to be rules. People have to know what they are.

I heard that you and Israeli Defense Minister Ehud Barak are working on building up Palestinian institutions. Is that correct?

Correct. . . . I want to build toward statehood. I want to create the best Ministry of Finance. I do not want to use the occupation as a pretext or an excuse.

Are you creating a currency and a central bank?

We are doing all of this. . . . But when we started doing this, it looked even more distant because the country was on fire and in a state of disintegration.

Because of Gaza?

The Gaza situation could have spilled over into the West Bank. There was a lot of violence also taking place in the West Bank in the immediate aftermath of Gaza.

Is Hamas still strong in the West Bank?

I wouldn't say that they are very strong, but I wouldn't say that they have no strength either.

How is Palestinian security performing on the West Bank?

Our security performance has improved markedly.

Is the Israeli security working with your security? Is there . . . cooperation?

It's been dead for a long time, to tell you the truth. New realities emerged after spring of 2002, in which the Israelis pretty much assumed authority [for] security in all areas of the West Bank, including areas which were designated PA areas. Israel was not about to give this up. What do you do? Israel says it is taking care of security but it's doing so from its point of view. . . . I asked them what do you think happened to security conditions in the West Bank during the time period when you assumed the authority of the Palestinian Authority? A state of lawlessness has emerged. There was a progressive deterioration in law and order in the West Bank and a state of chaos has actually emerged. How can there be a state of security unless the security is for Palestinians and Israelis alike?

Does chaos exist today?

It's much better. Looking at this situation, I knew we had to assert our physical presence. But the Israelis would not agree to that. I was the one who really wanted to deploy. I really did not hesitate and I do not think it was a mistake and I will do it again.

It worked?

It worked. We started in the most difficult city, Nablus. Poor morale, poor performance. At the same time, you really cannot wait until you get it fixed to begin to provide security service. Security is the most basic of all services.

President Abu Mazen [ Mahmoud Abbas] and Prime Minister Ehud Olmert are conducting peace talks. Is anything going to happen?

They have not proceeded at a pace that's consistent to obtain the objectives set forth at Annapolis. . . . Annapolis set in motion two tracks. The second . . . talks about the need to immediately implement phase one of road map obligations. People forget about that. It's important to me because it preserves the possibility of a two-state solution.

How do the Americans feel about that?

This document was agreed to in 2003. It was about governance, institution building and security.

How do you unite Gaza and the West Bank again? How do you get rid of Hamas?

My starting point is not to get rid of anyone. We have to be accepting of political pluralism.

Is it a democracy when people are shelling Israel?

As soon as there is acceptance by everyone, including Hamas, that there is one authority here and it is the sole address for weapons, there can be a resolution to our conflict. Ultimately our people have to see things for what they are and move away from empty slogans that have brought us nothing but complete calamities. The reason we slid into this complete chaos in Gaza is not so much because there was political disagreement but because there was a channel through which political disagreement or discord translated into disaster and that is militias, outside the purview of the Palestinian Authority.

If they keep shelling Israel, won't the Israelis go into Gaza?

The cycle of violence definitely has to stop. We cannot go on like this. I spoke out publicly against violence from Gaza. Also, we spoke publicly against the disproportionate Israeli response . . . the massive casualties.

It's not really a cycle of violence. It's people in Gaza shelling Israel.

I do not want to be less than 100 percent clear on this. We are against violence from Gaza.

Is it a problem or an advantage for you that you are not in Fatah?

I don't think it really is a plus for someone to be in politics without a party.

Do you want to join?

If I did not become a party man when I was younger, I'm not going to do that now. What I want to do is to give our people a sense of hope and possibility. That's what I want more than anything else. You want your people who are down but not out to begin to think, We can do this. What I really want is to rekindle some sense of ability and capacity . . . . . . Israel itself was not established in 1948, it was declared in 1948. It had the institutions of state before 1948. And that's what I want to do.