A week ago I wrote in this column that “the house is on fire and it’s time to wake up before everything we have built is destroyed by our own doing.”I was, of course, not referring to the tragic fire in the Carmel Forest. The fire is now out and Nature will have to work its wonders to bring life back where cinders now took over, but Nature knows how to recover.The writer is co-CEO of the Israel/Palestine Center for Research and Information (www.ipcri.org) and is in the process of founding the Center for Israeli Progress (http://israeli-progress.org).The fire I wrote about is the proverbial fire under the house of the Zionist enterprise, and I wonder how it will be defeated. The country is facing the most crucial period in its history, with a need to make unprecedented decisions, and it seems that the decision makers are not even aware.Prime Minister Binyamin Netanyahu has defined one of the most significant threats as the movement to delegitimize Israel. If he doesn’t put out the fire, he ain’t seen nothin’ yet! Israelis must wake up to the reality that ending the occupation and creating a Palestinian state are no longer negotiable.The right of the Palestinians to live as a free people in their own state is not questioned today anywhere in the world except here. The world is tired of this conflict. The world is tired of Israeli excuses, including its refusal to stop building in settlements.The world does not understand what Israel wants. The world cannot understand what Netanyahu’s strategy is, and where it’ leading. The world also cannot accept that because of a belief that only the IDF can prevent terrorism, millions of Palestinians should be denied their basic freedom, dignity and self-determination.ISRAEL HAS no strategy, no policy and no direction with regard to negotiating peace. I recently spoke with one of its negotiators – a rather senior fellow. He too admits that he does not know what the strategy is, or what the prime minister seeks to achieve.The Palestinian negotiators submitted a full plan to US envoy George Mitchell. He came back with questions and they provided answers. Israel has not done the same.Mitchell, Secretary of State Hillary Clinton and even President Barack Obama have no idea what Netanyahu wants or how he plans to do it.After 18 years of peace process, it is clear that the Palestinians refuse to enter another open-ended negotiation. In light of Israel’s continuing to create facts on the ground, especially in Jerusalem, they cannot agree to negotiations unless there is a settlement freeze. It is true that they negotiated in the past without such a freeze, but look where it got them. Since the beginning of Oslo, the number of settlers has more than doubled.During Netanyahu’s first term, Har Homa was still a forest- topped hillside. Palestinians cannot stand by and negotiate forever while more possibilities for creating their state are removed by more settlements.Israelis seem quite prepared to manage the conflict with no real resolve to end it. The amazing thing is that ending the occupation and creating a Palestinian state is not a favor to the Palestinians, it is the most urgent strategic necessity for Israel.It seems that Israelis have no concept of the reality on the other side. Israel has removed checkpoints and the Palestinian economy is blossoming. We have seen the new clubs, hotels and restaurants in Ramallah on our news channels. The work of the Palestinian Authority under Prime Minister Salam Fayyad is indeed impressive.But the entire logic of the successful Fayyad project is the establishment of a state in 2011. The rebuilt PA security forces, trained and equipped by the US, have eliminated terrorism and terror infrastructure in the West Bank because they are preparing for a state, not to provide security for the continuation of the occupation.Why should any Palestinian policeman provide security for any settler? If the Palestinians come to understand that they are serving the occupation and not its end, the entire logic on which the PA is built collapses. And at that point there is no reason at all for any PA official to continue to serve.Abbas’s threat to disband the PA should not be understood as an empty declaration. There are significant forces within the PA and the PLO which are seriously lobbying for it. In the absence of negotiations with substance and a timetable, there is no sense in continuing to play the game of false independence.IN TODAY’S reality, Palestinians still live in a cage controlled by Israel. Their economy is subjugated to Israel’s, their rights of movement in and out of the West Bank are controlled by Israel. The population registry is under Israel’s control. Israeli forces move in and out freely in all areas of the West Bank. President Abbas requires Israel’s permission to move around. Any planning, licensing or building in 60% of the West Bank called Area C requires Israeli approval.Netanyahu must be called to task – are you ready to grant Palestinians their independence or do you wish to continue to control them? There is no middle ground. We who work for peace had hoped that the US would help us reach an agreement, but it seems it will not be providing the friendly push to help make the difficult decisions. But the creation of a Palestinian state is a Zionist imperative, not an American one. It is in Israel’s interest to midwife its birth.The implementation of the two-states-for-two-peoples solution must come from the inner belief that we are making a choice not to be enemies of the Palestinian people. The more painless the birth of the Palestinian state, the more likely that we can move on to a process of real reconciliation and create the stability and security that both peoples require.There are places in the Land of Israel which represent the cradle of our heritage. We should be glad to visit them as welcome guests of the Palestinian state.We have the Coastal Plain, the Galilee and the Negev and we will share Jerusalem, but the West Bank is Palestine. If Israel would prefer to trade the Coastal Plain for the West Bank, I am quite sure the Palestinians would agree.In peace we will have our state on 78% of the land between the river and the sea, and the Palestinians will accept the principle of some minor swaps that will allow some 75% of the settlers to remain in their homes, but the rest will have to come back to Israel or move into the annexed areas. The price of our freedom is the freedom of the Palestinians. Either we accept it now, while we have the overwhelming support of the West, or we will accept it later after we lose most of our supporters and most of our legitimacy.