In his Bar-Ilan University speech on Sunday, Prime Minister Binyamin Netanyahu accepted US President Barack Obama's challenge of frank talk between allies. Before Netanyahu said yes to the possibility of a Palestinian state at the end of a realistic peace process, he spoke about the roots of the conflict and the narrative, and on these issues, more than anything else, he differed from Obama's Cairo University speech. The conflict, he reminded Washington (and Europe), did not result from the 1967 war, but rather from the intense, consistent and often violent Arab refusal to acknowledge Israel as the ancient homeland of the Jewish people, and the Jewish right to self-determination in this homeland. On this fundamental requirement for mutual acceptance, Palestinian leaders continue to maintain the old rejectionist stance - as their response to the speech demonstrated. Netanyahu reminded Obama, as well as his Israeli critics, that even the most moderate Palestinians have been unwilling to acknowledge the Jewish historical roots in this land. Unless this obstacle is overcome, Netanyahu emphasized repeatedly, there is no realistic possibility for a stable and lasting peace agreement. Similarly, in contrast to Obama's emphasis on Jewish suffering and the Holocaust, both in Cairo and then in Buchenwald with Elie Wiesel, Netanyahu replied that Israel was founded on the basis of historic and political rights, and not in response to anti-Semitism and suffering. The history of 2,000 years of political powerlessness and persecution served to highlight the need for restoration of Jewish self-determination. In the strongest line of the speech, Netanyahu declared that had Israel come into existence earlier, the tragedy of the Holocaust would have been averted. What went unsaid was the degree to which Obama's misplaced emphasis served to reinforce the Arab narrative in which the creation of Israel resulted from European guilt. As part of this frank talk, Netanyahu told his audience - Israelis, Americans and Arabs - that in order to make progress toward a two-state solution, the legitimacy of the Jewish state would have to be explicitly recognized. In addition, everyone would need to recognize that the problem of Palestinian refugees created by the 1948 war would have to be solved outside of Israel's borders, in contrast to the continued effort to use them to change Israeli demography. Just as Israel absorbed masses of Jewish refugees from Arab lands - their numbers were roughly equal to the Palestinian refugees - and despite the economic difficulties of this process, the Arab states and the world would need to do the same. Without a solution to the refugee issue outside Israeli borders, there can be no foundation for a stable peace agreement. Netanyahu also spoke frankly to his Israeli constituents - the voters for Likud and the other coalition partners that recently returned him to the position of prime minister. The taboo on a Palestinian state in any form was broken - the international (meaning primarily American) situation required recognition of this reality. The Palestinians were entitled to their own flag, anthem and country, he said. Thus, the issue that ostensibly led to the failure of post-election negotiations with Tzipi Livni and Kadima for a broad coalition government suddenly disappeared. And while Netanyahu called for American and international guarantees that a Palestinian state would be demilitarized, this would be difficult to ensure in practice, as events in Gaza have demonstrated. Overall, in this speech, the prime minister went somewhat further than both his critics and his supporters should have expected, including acceptance of a settlement freeze, at least with respect to additional territory. On Jerusalem, no new ground was broken, as Netanyahu declared that the city would not be divided and that the members of all religions would continue to be able to pray at their holy sites. Obama's speech also treated Jerusalem carefully and without details, suggesting agreement (either tacit or explicit) that negotiations on this very complex issue should be left for later. But this is only an opening position in what all sides recognize will be a difficult negotiation process, primarily between Obama and Netanyahu, and also between Israeli and Palestinian leaders. With the big speeches behind them, both leaders will now have to work on the much more difficult task of translating noble words into successful policies. Gerald Steinberg is the chairman of the Political Science Department at Bar-Ilan University and executive director of NGO Monitor.