Two weeks before the start of the second intifada in September 2000, Yasser Arafat, for the umpteenth time, threatened a unilateral declaration of the "State of Palestine." At the same time, Arafat's protege, Marwan Barghouti, now serving a life sentence in Israel, pledged to outline peacefully with his people "the legitimate borders of our state alongside Israel." Had they carried through their threats, they might well have saved Palestinians and Israelis from the intifada and from its thus far fruitless diplomatic aftermath. Is it too late for a Palestinian state, for peace based on a two-state solution? Sixty years ago the world determined that the only way to contain the conflict over Mandatory Palestine was to establish two states - one Jewish, one Arab. Traditional peace thinking since Oslo, a decade and a half ago, has envisaged a Palestinian state as the end result of negotiations, as the icing on the peace cake. And the Annapolis process launched last November is going down that same dead-end road. The way to break the deadlock is to reverse the process: Two states first, peace later. For now, a sense of hopelessness prevails. When U.S. President George Bush's envoy, Gen. William Fraser, met recently with Israeli and Palestinian officials to monitor compliance with the so-called peace roadmap - the first trilateral meeting since Annapolis - he was barely able to raise a yawn among skeptics on both sides. Israelis and Palestinians are disturbed by the fact that every peace process has inevitably been accompanied by a process of violence. Yitzhak Rabin felt impelled to coin the slogan: "Fight for peace as if there is no terror, fight terror as if there is no peace." The chronology of peace-making used to be: Implement a cease-fire; then deal with the interim issues - fighting terror (the Palestinians) versus freezing settlements (Israel); and, only then, grapple with the core issues of borders, security, refugees and Jerusalem. At Annapolis, for the first time, the debilitating nexus between peace-making and violence was broken. Israelis and Palestinians were coaxed into going beyond the tyranny of "who starts" implementing the paralyzing interim issues. Instead, they were persuaded to get right down to the final phase of peace-making. This produced a corollary to the Rabin maxim: "Deal with the core issues as if there is no cease-fire; deal with the cease-fire provisions as if the core issues are already being settled." Is it enough? Enter Tony Blair, the Quartet's special envoy to the region: "Pose the question to Israelis or Palestinians: Do you want peace with your neighbor based on two states? And you'll get the answer 'yes.' Pose them the question: Is peace credible? And the answer is 'no,'" says the former British prime minister. "The Israelis think they have no serious partner for peace because the Palestinians lack the capability even if they have the intention. The Palestinians think the Israelis lack the intention of lifting the weight of the occupation even if they have the capability. We have to bridge the credibility gap." Blair advances the following innovative remedy: "Before political negotiations can be meaningful, you need to start getting the reality of the Palestinian state on the ground." Some chastise the former prime minister for "insufficient commitment" to his mission. Others charge he's not "hands on" enough. The $7.4 billion he helped raise from the international community for building the infrastructure of Palestine suggests otherwise. But it's not just a question of money, Blair says. "Statehood is about more than geography and territory. The Palestinians have to prove that they can run a state and that they can govern it well." Nor is it just an idea. Blair insists: "Under General Fraser's expertise, the Palestinians have developed a plan. Their first battalion, which is currently training in Jordan, will be deployed in the West Bank in June. A successful state is not about an agreement but about Palestinian capabilities in handling security and their economy." But what of the credibility gap - the profound mistrust that dominates both people's attitudes to each other? Peace-making can only be credible if it is visible, and what would be more visible than a functioning state? Establishing a Palestinian state now could enhance Palestinian confidence in their state-building endeavor and simultaneously undermine the prevailing Israeli "we have no partner" mindset. Above all, "Palestine Now" would be a real testing ground of the Palestinians' ability to deliver on what Israelis seek even more than peace - their security. Back in 2000, Arafat and Barghouti had the same purpose in mind - to get the world to declare for them their Palestinian state alongside Israel. Blair seems to be going even beyond that: Sixty years after the last British High Commissioner departed from Haifa Port, ending the British mandate, Blair is seeking to finally shepherd Palestine into existence, literally to make the two-state solution come alive. And, peace? It will come later as the icing on the two-state cake. Jerrold Kessel and Pierre Klochendler are independent journalists and filmmakers based in Jerusalem.