December 4, 2002

Twenty-seven months ago the Palestinian Authority commenced a campaign of terror against the State of Israel. Since then, we have been confronting a ferocious battle against a culture of bloodshed and murder, which has targeted Jews and Israelis everywhere. This campaign of terror was not coincidental; it was meticulously planned and prepared by the Chairman of the Palestinian Authority who misconstrued the high regard for human life in Israeli society as a way to compel us to capitulate to terrorism and coerce us into additional political concessions, concession with nothing in return.

The past two years have been a difficult and painful test for Israel's national strength. The callousness and brutality of the terrorists was aimed--first and foremost--at undermining the sense of justness of the people of Zion. This is not the place to ask what led the PA Chairman to question the inner strength and determination which has always characterized the citizens of Israel, but it is clear that the terror has not defeated and will never defeat the State of Israel. They tried to break our spirit--and failed. This failure has resulted in scathing Palestinian criticism of Arafat, his path of terrorism and ongoing strategy of violence against Israel.

Today, most of the weight of the global leadership is in the United States. From the first days of the establishment of the State of Israel, our bond with the United States has been a supreme strategic asset. My Government has further consolidated our relations with the United States and formed a special closeness with the U.S. Administration and Congress. These special relations, the understanding of Israel's needs, and the cooperation with President Bush and his administration are unprecedented. Israel has in the United States true friends who genuinely and honestly care for our security.

Our political understandings with the United States and the Administration's understanding of our security needs have provided us with the required leeway in our ongoing war on terrorism. The war on terror has been accompanied by exorbitant costs and harsh financial damage, and I hope and believe that in the coming months we will receive special aid, to support us in our economic campaign.

On June 24th this year, President Bush presented his plan for a true solution to our conflict with the Palestinians. The peace plan outlined in the President's speech is a reasonable, pragmatic and practicable one, which offers a real opportunity to achieve an agreement. We have accepted in principle the President's plan and the sequence presented therein. Our agreements with the Palestinians are based on the lessons the Americans learned from the Clinton-Barak plan, and my experience as one who has, for many years, participated in the security and political campaign in the Palestinian arena.

After concerted efforts, the U.S. Administration has understood and agreed that the only way to achieve a true peace agreement with the Palestinians is progress in phases, with the first phase being a complete cessation of terror. President Bush's speech is a fatal blow to Arafat's policy of terrorism and serves as proof of the failure of his attempt to achieve political gains by means of violence and terrorism. Only after a cessation of terror--and this is already agreed by most world leaders--will the commencement of peace negotiations between the parties be possible.

The American plan defines the parties' progress according to phases. The transition from one phase to the next will not be on the basis of a pre-determined timetable--which would have resulted in a build-up of heavy pressure on Israel towards the end of one phase and approaching the next phase. Rather, progress is determined on the basis of performance--only once a specific phase has been implemented, will progress into the next phase be possible.

On the basis of lessons learned from past agreements, it is clear to all that Israel can no longer be expected to make political concessions until there is proven calm and Palestinian governmental reforms.

In this context, it is important to remember that political concessions which will be made in the future--as those made in the past--are irreversible.

Even the current security reality, with the IDF operating freely inside Palestinian cities, arises from security needs and has not changed the political situation of two years ago. Israel will not re-control territories from which it withdrew as a result of political agreements. Therefore, the achievement of true and genuine coexistence must be a pre-condition to any discussion on political arrangements.

The Jewish people seek peace. Israel's desire is to live in security and in true and genuine coexistence, based, first and foremost, on the recognition of our natural and historic right to exist as a Jewish state in the land of Israel, while maintaining genuine peace.

The achievement of true coexistence must be carried out, first and foremost, by the replacement of the Palestinian leadership which has lied and disappointed, with different leadership which can--and more importantly--is willing to achieve real peace with the State of Israel. Unfortunately, there remain a few in Israel who believe that Arafat is still relevant. However, the U.S. Administration--with the world following in its footsteps--has already accepted our unequivocal position that no progress will be possible with Arafat as the Chairman of the Palestinian Authority. This man is not--and never will be--a partner to peace. He does not want peace.

The reconstruction of a Palestinian government should commence with governmental reforms which will ultimately lead to the establishment of a new, honest and peace-seeking administration, the removal of Arafat from his command of power and sources of financing, and from the decision-making process, and his relegation to a symbolic role.

In concordance with the sequence presented by President Bush, a Chief Executive Officer for Reforms will be appointed to the Palestinian Authority, and will constitute the head of the executive authority and the source of administrative authority. The provisional Palestinian government will administer a more efficient governmental system, fight the prevailing corruption in the PA and adhere to regulations of proper management. That government will lead a comprehensive process of reforms, maintain coexistence and prepare the general elections.

The elections in the Palestinian Authority should be held only at the conclusion of the reform process and after proper governmental regulations have been internalized. The goal is that these will be true elections--free, liberated and democratic.

Parallel with, and perhaps even prior to the governmental reforms, a security reform will be carried out, consisting of three principle parts:

1. Dismantling all existing security (/terrorist) bodies, the majority of which are, in fact, involved in terror; these organizations, which are directly subordinate to Arafat, are essentially corrupt, and responsible for the deaths of hundreds of Israelis. These bodies will be replaced by two or three new organizations which will consist of a police force and security services; these new organizations will have a uniform command, which will be responsible for dismantling the current complex web of militias and armed gangs.
2. A Minister of the Interior will be appointed, and will be responsible for collecting illegal weapons and transferring them to a third party which will remove them from the PA territories and destroy them, and outlawing terrorist organizations.
3. In addition, cooperation on security issues between the PA and Israel will be renewed immediately.

The security reform must accompany a sincere and real effort to stop terrorism, while applying the "chain of preventive measures" outlined by the Americans: intelligence gathering, arrest, interrogation, prosecution and punishment.

Another important matter is the international demand for honest, effective, non-corrupt and transparent administration of the PA financial system; it is of great importance that the PA manage its financial affairs in concordance with the rules of proper government which will obligate the Palestinian Authority, inter alia, to produce a detailed budget, under a budgetary control system. This budgetary auditing system will ensure a balance between income and expenditure, and will verify that budget spending only serves appropriate economic purposes for the benefit and welfare of the Palestinian people. Such a supervising mechanism will also prevent the transfer of money for the financing of organizations or individuals involved in terror.

Taking the financial system out of Arafat's hands, and appointing a strong Minister of Finance with authority, constitutes an important factor for stopping the terrorist system operated by the Palestinian Authority. We are hopeful that the newly appointed PA Minister of Finance will operate a body to oversee and handle foreign aid funds received by the PA, and channel those funds to clearly defined projects which will benefit the Palestinian people and which are not contaminated by terror and corruption.

Peace and coexistence cannot be achieved without reform in the fields of education, media and information; the virulent incitement mechanism instigated by the PA against Israel must be stopped immediately; there can be no peace while the Palestinian education system instills in their young generation a culture of hatred, violence and terror.

Today, there is an increasing understanding in the world that stopping the phenomenon of suicide terrorism is dependent on: the cessation of incitement, ending the religious ratification of terrorism by radical elements in the Muslim world--with the encouragement and support of various Arab states.

The Palestinian justice system and law-enforcement must also undergo significant reforms. It is unheard of that in a law-abiding country, one hour after being arrested for theft, a suspect is sentenced and hanged, while on the other hand those involved in terror enter and leave prison in the "revolving door" principle. As long as those who commit crimes against the State of Israel are not severely punished, no progress will be made in President Bush's sequence.

The two sides will advance to the next phase of President Bush's sequence when a new, different, responsible and non-corrupt Palestinian leadership emerges. Terror will cease, and the Palestinian leadership will not allow it to be renewed. Civil and economic cooperation will be established. Incitement will be stopped and education towards peace will be fostered. At the same time, Israel will act to lift military pressure, create territorial continuity between Palestinian population centers, and ease daily life for the Palestinian population.

The second phase of President Bush's sequence proposes the establishment of a Palestinian state with borders yet to be finalized, and which will overlap with territories A and B, except for essential security zones. This Palestinian state will be completely demilitarized. It will be allowed to maintain lightly armed police and interior forces to ensure civil order. Israel will continue to control all entries and exits to the Palestinian state, will command its airspace, and not allow it to form alliances with Israel's enemies.

As I have promised in the past, President Bush's sequence will be discussed and approved by the National Unity Government which I intend to establish after the elections, and I will do my utmost to establish as broad a National Unity Government as possible.

In the final phase of President Bush's sequence negotiations will be opened to determine the final status of the Palestinian state and fix its permanent borders. As I emphasized, no progress will be made from one phase to the next until such time as quiet has been restored, Palestinian rule has undergone fundamental changes, and coexistence is ensured.

We all want peace. It is not a competition over who wants peace more. We also know that entering into political negotiations for peace is the true path which will bring about acceleration of economic growth and prosperity. I have said it before, and will say it again today: Israel is prepared to make painful concessions for a true peace. However, the government under my leadership will not be seduced into believing false promises which will endanger the security of the State of Israel.

My ideological and political path is well-known to you from the many functions I was privileged to fill during my decades of public service. These decisions are not easy for me, and I cannot deny that I have doubts, reservations and fears; however, I have come to the conclusion that in the present regional and international reality Israel must act with courage to accept the political plan which I described. There are risks involved, but also enormous opportunities.

I know that there are many who will attack the political outline I have just detailed. During the last few years many of us were tempted to believe in lightning-quick solutions which would lead to the security and peace we have longed for, and that this long-lasting conflict between our two peoples could be solved by the "blade of a sword"--I am familiar with these voices from both sides of the political spectrum.

Regrettably, this is not the way things are. These methods have failed--the solution to the conflict must be gradual and controlled. We must, in all stages, act with prudence and determination, exercise judgement, and make very sure that all commitments and agreements are implemented by both sides.

It is true that this is not a shining path which will lead us to instant, magical solutions, but I am certain that only by going forward in this direction, step by step, will we be able to achieve security for the Israeli people, and reach the peace we all yearn for.

Thank you, and happy holiday.