Israel's best peace option is to negotiate with Hamas and unilaterally recognize a Palestinian state with temporary borders, Gideon Grinstein, founder and president of the Re'ut Institute, said Monday at the Herzliya Conference during a session on Demography, Borders and Palestinian Statehood. "Israel has no choice [but to deal with Hamas] and it's already happening on a municipal level," said Grinstein, whose non-partisan Zionist think-tank is designed to strengthen the vision of Israel as Jewish and democratic. "Hamas has legitimacy socially, on a municipality level and this week it will enter the Palestinian Legislative Council and possibly the cabinet and ministries." He said that recognizing a state of Palestine with temporary borders is to Israel's advantage because it erodes the idea of a binational state, divides the final-status arrangement and weakens the issue of the Palestinian refugees. Other peace options are closed, Grinstein said. The road map is at a dead end because Fatah cannot compromise on the refugee issue and a final-status agreement is impossible because Hamas's charter opposes recognizing a Jewish state, he said. After the formal recognition of Palestine with temporary borders, terror infrastructures should be disarmed and then final status issues can be dealt with, he said. Transfer of Israeli Arabs to the new Palestinian state was part of a border solution that some experts supported. David Newman, of the University of Haifa, presented the conclusions of a non-partisan group. With the financial support of the European Union, the group prepared possible future borders for a two-state solution. One conclusion was that "the separation fence was not the basis for the border," Newman said. "We have made bad neighbors into worse neighbors, and we need to think of the long-term fallout compared to short-term security benefits." "The most difficult issue among group was Arab demographic change," he said. Some group members said it should not be discussed because of legal and moral implications, others said it could be an option only if the population involved agrees. Others said it can be done if the two governments agree.