I have already stressed the first principle - recognition. Palestinians must clearly and unambiguously recognize Israel as the state of the Jewish people. The second principle is demilitarization. The territory under Palestinian control must be demilitarized with ironclad security provisions for Israel.

Without these two conditions, there is a real danger that an armed Palestinian state would emerge that would become another terrorist base against the Jewish state, such as the one in Gaza.

We don't want Kassam rockets on Petah Tikva, Grad rockets on Tel Aviv, or missiles on Ben-Gurion Airport. We want peace.

In order to achieve peace, we must ensure that Palestinians will not be able to import missiles into their territory, to field an army, to close their airspace to us, or to make pacts with the likes of Hizbullah and Iran. On this point as well, there is wide consensus within Israel.

It is impossible to expect us to agree in advance to the principle of a Palestinian state without assurances that this state will be demilitarized.

On a matter so critical to the existence of Israel, we must first have our security needs addressed.

Therefore, today we ask our friends in the international community, led by the United States, for what is critical to the security of Israel: Clear commitments that in a future peace agreement, the territory controlled by the Palestinians will be demilitarized - namely, without an army, without control of its airspace, and with effective security measures to prevent weapons smuggling into the territory; real monitoring, and not what occurs in Gaza today. And obviously, the Palestinians will not be able to forge military pacts.

Without this, sooner or later, these territories will become another Hamastan. And that we cannot accept.

I told President Obama when I was in Washington that if we could agree on the substance, then the terminology would not pose a problem.

And here is the substance that I now state clearly: If we receive this guarantee regarding demilitarization and Israel's security needs, and if the Palestinians recognize Israel as the state of the Jewish people, then we will be ready in a future peace agreement to reach a solution where a demilitarized Palestinian state exists alongside the Jewish state.

Regarding the remaining important issues that will be discussed as part of the final settlement, my positions are known: Israel needs defensible borders, and Jerusalem must remain the united capital of Israel with continued religious freedom for all faiths.

The territorial question will be discussed as part of the final peace agreement. In the meantime, we have no intention of building new settlements or of expropriating additional land for existing settlements.

But there is a need to enable the residents to live normal lives, to allow mothers and fathers to raise their children like families elsewhere. The settlers are neither the enemies of the people nor the enemies of peace. Rather, they are an integral part of our people, a principled, pioneering and Zionist public.

Unity among us is essential and will help us achieve reconciliation with our neighbors. That reconciliation must already begin by altering existing realities. I believe that a strong Palestinian economy will strengthen peace.

If the Palestinians turn toward peace - in fighting terror, in strengthening governance and the rule of law, in educating their children for peace and in stopping incitement against Israel - we will do our part in making every effort to facilitate freedom of movement and access, and to enable them to develop their economy. All of this will help us advance a peace treaty between us.

Above all else, the Palestinians must decide between the path of peace and the path of Hamas. The Palestinian Authority will have to establish the rule of law in Gaza and overcome Hamas. Israel will not sit at the negotiating table with terrorists who seek their destruction.

Hamas will not even allow the Red Cross to visit our kidnapped soldier Gilad Schalit, who has spent three years in captivity, cut off from his parents, his family and his people. We are committed to bringing him home, healthy and safe.

With a Palestinian leadership committed to peace, with the active participation of the Arab world, and the support of the United States and the international community, there is no reason why we cannot achieve a breakthrough to peace.

Our people have already proven that we can do the impossible. Over the past 61 years, while constantly defending our existence, we have performed wonders.

Our microchips are powering the world's computers. Our medicines are treating diseases once considered incurable. Our drip irrigation is bringing arid lands back to life across the globe. And Israeli scientists are expanding the boundaries of human knowledge.

If only our neighbors would respond to our call - peace, too, will be in our reach.

I call on the leaders of the Arab world and on the Palestinian leadership, let us continue together on the path of Menachem Begin and Anwar Sadat, Yitzhak Rabin and King Hussein. Let us realize the vision of the prophet Isaiah, who in Jerusalem 2,700 years ago said: "Nation shall not lift up sword against nation, and they shall learn war no more." With God's help, we will know no more war. We will know peace.