[Palestinian Authority] President [Mahmoud] Abbas has issued a presidential decree that “State of Palestine” should be used wherever “Palestinian Authority” has been used until now. Has the Palestinian state been created? Not in the sense that we want one. The state that we are looking for has to be a fully sovereign state on the territory occupied in 1967 with Jerusalem as its capital where our people can live as free people with dignity. What we have, though, is recognition of our status as “state,” and [Abbas] intended to address that aspect of it, but we still don’t have the state we’re looking for.Go back for a moment to Israeli communities where they are claiming that they are not part of the Palestinian territories. Why do you feel that at this moment it’s going to prevent a two-state solution? What I was referring to specifically was the announcement – several of them – that pertained to activity in the Jerusalem area, and specifically the E1 project. As anyone who knows something – or anything – about this enterprise will tell you, what this will do will be to completely isolate east Jerusalem from the rest of its Palestinian surroundings, thereby breaking up the West Bank into two major segments....Palestinian statehood has been described internationally and diplomatically as something that has to acquire the feature of being viable and contiguous.Has it strained relationships with the US? That is really the issue: what is it that can be done to restore some credibility to that process; to get all players to invest again and the capacity of that process to deliver. It’s not that we take it lightly – the difference of view with the United States – we don’t. But I think that the United States will agree, for sure, that the record so far has been dismal and one that has produced a lot of frustration where the process has gone on so long without coming close to delivering.President Abbas had stated that he was going back to talks but this has not happened. Are there any plans? What will it take? There are some issues relating to the fact that the United States administration is in transition. Also, Israel is going through elections, so some of it may be related to that. But some serious thinking has to go into what it is that has to be done so that when the process is re-launched again, it’s re-launched on a much sounder basis than what we had to deal with and to work with over the past 19 years.Does it matter whether Prime Minister [Binyamin] Netanyahu remains prime minister or whether opposition takes over? The present composition of Israel’s body politic is a challenge. I think that almost regardless of what kind of government emerges from this – and we have seen this, as a matter of fact, over the past four years or so – I think it is partly because the Palestinian question or relations with Palestinians or what the public expects their government to do did not feature prominently in the last elections.Surveys taken recently in Israel all show majority support for the notion of a Palestinian state alongside Israel – and that is significant for that to be the case. But when that is tested, and you take it to the Knesset or to the Israeli government, you find that actually within the governing coalition there are sharp views that are in disagreement with this.Speaking about your own politics, there haven’t been [Palestinian] elections...That’s obvious, and that’s something that needs to be addressed. And that’s part of the other matter that has to be fought – what I call the building of the political system democratically. That track is not something that should be seen as a luxury, but one that actually cannot but reinforce our path to freedom.Almost as essential as having funding – and on that note, you had some harsh words for Arab nations that had promised funding but had not fulfilled their promises. Why is this the case, and don’t they see how the cash shortage is affecting development? I was making a factual statement and I was not intending for it to be harsh. I was responding to a question that asked whether Europeans had paid, and I said Europeans have fully paid. And, as a matter of fact, so have the Americans. Other than the $200 million held up by Congress, money pledged until then was disbursed.That is not something I can say about all Arab donors. Some did, but most didn’t. And that really left us in a situation of extreme financial difficulty.The genesis of our financial difficulties lies in the fact that key Arab donors did not provide the funding pledged or programmed in our budgets and agreed to.That started about two and a half years ago, and with it, financial difficulties started to gather, getting more and more... difficult, to the point where we found ourselves in a crisis situation. But of course, when the government of Israel moved to stop and suspend the transfer of revenues it collected on our behalf, that dealt us a devastating blow because we were already in a very weak position, and that brought us to the point of complete incapacitation.I estimate that what we really need right now to get out of the financial difficulty because of the shortfall is about $600m. minimally. For this year, it is important that we get about $100m. a month to make ends meet. Otherwise, it will not be possible for the PA to overcome its financial difficulties and function normally. Last week, Fatah was welcomed in the Gaza Strip in what some are calling a massive call by the people for reconciliation. Hamas was allowed to hold a celebration in the West Bank under your administration.Are we finally seeing signs of reconciliation? I think those scenes you saw, especially in Gaza, was a scene where the people made a very clear and unequivocal statement demanding an end to the state of separation – demanding reconciliation. It’s definitely what people want, where people are and where we should get.You’ve likened this to the parties in Israel with vast differences that live together. Why is it so difficult for the Palestinians? That’s exactly my point. We should overcome those difficulties to the point of being able to manage our coexistence. And I think it should be possible. You’re exactly right, just like the government of Israel is a coalition of parties that are not all like-minded. Why is it so impossible for us to get together in a like fashion in a manner that allows us to manage that coexistence? When 1,000 Hamas members held by Israel were released in the Gilad Schalit deal, Hamas chided that it produced results while the Fatah-PA only talked.We heard the same taunts after the recent week of fighting between Hamas and Israel. You, yourself, made statements that agreed with that assessment.Has the idea of a peaceful campaign been lost? There’s no question that as a consequence of the events you just mentioned we have sustained what I myself have termed as “doctrinal defeat” in terms of the doctrine espoused by the PA: one of engagement and a non-violent path to freedom.I think it was seriously and severely challenged by the events you have mentioned in terms of the efficacy of this approach, in terms of its capacity to deliver results. I do not take it in a resigned way. It’s something we’ll have to deal with and live with... forever.And that’s the situation right now.The Palestinian Authority relies heavily on Israel in terms of [its] economy. What is that percentage in terms of goods, etc.? Vastly. For example, if you take trade, we’re highly dependent on the Israeli economy, on both [the] import side and export side. Two-thirds of our imports come from Israel. A larger part of our exports go to Israel. We’re dependent. Part of it is proximity, but the larger explanation lies in lack of adequate access to markets that lie outside. We’re not in control of borders. It’s very difficult to try to be competitive, for our private sector to be adequately competitive, given that highly capricious control regime.Some charge that your government is failing to prepare its people for peaceful coexistence because it glorifies those responsible for violent acts. How do you respond to those who say the culture of peace is not being taught? Cultural peace, as a matter of fact, has the greatest chance of gaining roots in a context that actually promises peace. And I think that the beginning was good. When this whole process began, there was a lot of activity that was anchored on this, creating conditions of acceptance of the other; learning more about the other; engaging in discussions. At all levels.We’re not talking about political engagement here, we’re talking about people-to-people initiatives. Some of them are still happening today. It is unfortunately the case that we’re dealing with a conflict that is riddled with difficulties and complexities, beginning with vastly different narratives [and including] hostilities, wars, military conflict and what have you. And when you have a situation like this, you cannot expect to have an environment and a culture that is all okay. The challenge for us is to change it, and I’m a firm believer in it.There are Palestinians who are feeling much more pressure today if they engage with Israelis...Let’s say Ramallah, [for argument’s sake]. You are engaging tomorrow in an activity in the nature of people-to-people discourse with Israelis, and the night before, there is an Israeli military raid on Ramallah. How would that make you feel? Worse! If the night before you’re consoling the family that has lost a young man or woman in the way the Israeli army deals with non-violent Palestinian protests sometimes, how would you feel about going through with that activity? What if settlers had just raided the community? Uprooted trees and terrorized citizens, or worse. Desecrated a mosque. All of these acts retard progress in an environment where a culture of peace would flourish. That should be our goal. And we should really act on both tracks simultaneously.President Abbas is threatening to disband the PA. Western pundits dismiss it as rhetoric. What do you say? It’s not rhetoric in the fundamental sense of the PA going through the difficulties through which it’s going with the grip of the financial crisis being the worst ever.It’s not a question of a willful act of disbanding. It’s not really rhetoric in the sense that under the pressure that the PA is facing, all these challenges and pressures.... the PA will simply cease to be able to function. That is not rhetoric, it’s reality, and we see it every day. There’s an erosion in the ability of the PA to deliver in just about every sphere of government.