US President Barack Obama’s meeting with Prime Minister Binyamin Netanyahu and the Palestinian Authority President Mahmoud Abbas last September fueled speculation that there would be palpable progress in the peace process. But so far all attempts at reconciliation have yet to be translated into action.Continuing settlement activity in the West Bank and in Jerusalem has kept George Mitchell and his colleagues in the American negotiating team shuttling back and forth to the region, but the historically contentious issue of the Palestinian refugee crisis remains. This has already disrupted numerous efforts toward a final agreement, and is likely to present the biggest hurdle for negotiators in the future.Instead of waiting for final status talks to resume, the international community, led by the European Union, should now take steps to improve the political atmosphere surrounding the refugee issue. There is only one realistic solution that could be envisaged as part of a two-state solution, and that means compensation, resettlement and rehabilitation in the West Bank and Gaza. The EU must therefore take the lead and use its formidable economic and political clout to help bring the tragedy of the refugees to an end.www.alonben-meir.comBy doing so, it would establish itself as an indispensable interlocutor in the peace process, thus enhancing its own strategic and economic interests in the Middle East.Of all the issues that divide Israelis and Palestinians, spanning as they do territorial claims, secure borders and the future of east Jerusalem, the refugee problem continues to stymie all pragmatic solutions. The majority of Palestinians believe that the creation of Israel in 1948 precipitated the problem, so the solution lies in the right of return to the State of Israel as a matter of principle. Israel has hotly refuted this argument, and in every encounter with the Palestinians since 1988 has made it clear that to sustain its Jewish majority, which it considers a sine qua non for any agreement, the solution must be found through resettlement and rehabilitation in the West Bank and Gaza. This will fulfill the call for Palestinians to return to their homeland, albeit not to their original homes.Other refugees may opt to resettle in their present country of residence as long as these countries are prepared to accept them as citizens.MANY PALESTINIAN and Arab leaders have since 2000 conceded in private as well as in negotiations with Israel that apart from a symbolic 20,000-30,000 refugees returning to Israel proper as part of family reunification, the solution lies largely in resettlement and compensation in the new state of Palestine. Such a solution is based on the 1967 Resolution 242 of the UN Security Council, which calls for “achieving a just settlement to the refugee problem.” This is opposed to the 1948 Resolution 194 of the UN General Assembly, where article 11 states that “the refugees wishing to return to their homes and live at peace with their neighbors should be permitted to do so at the earliest practicable date.” Considering the historical magnitude and the politicization of the refugee issue, it is necessary at this point to change the political formula.Waiting for a peace deal to be signed could take years, and as matters stand the refugee issue could collapse any final status agreement, as happened at Camp David. Instead of seeking to change the political narrative about the need to resettle the Palestinians in their homeland, the EU should first create the means to make that possible.The EU has championed the cause of Palestinian refugees and has been the largest donor to UNRWA. Considering, too, the natural alliance the Palestinians have with the EU as a possible balance to the close US-Israeli relationship, the EU is in an ideal position to dramatically change the status of the 4.5 million refugees registered by the UN. This is also an opportunity for Europe to solidify its role as an international mediator, with a vested interest in the success of the Middle East.To have a substantial impact on the way this conflict has been framed, the EU will need to take a number of steps to change the entire structure in which the refugees exist. It needs to partner with the PA to create a ministry for resettling refugees. It would also require capital of perhaps up to $10 billion as well as a close relationship with the PA and neighboring Syria, Lebanon and Jordan, where many of the refugee camps are located. Raising the funds to support the resettlement of refugees in the West Bank and Gaza would help to lay the foundation for the state of Palestine, but needs to be accompanied by a support system.This would be in line with the plans of PA Prime Minister Salam Fayyad to establish a de facto state in the West Bank and Gaza.His state-building vision has engendered Western enthusiasm along with financial and political support from the Obama administration and the EU.Although Fayyad invokes Resolution 194 on the refugee question, he also emphasizes that “the government will do all within its power and authority to bolster the legal right and the living conditions of the refugees in the occupied territory, particularly in refugee camps, including the provision of all the resources it can afford to support and alleviate the suffering of the refugees in all aspects of their lives.” Every country that speaks of the need to find a solution for the refugees must contribute to this effort, including the US, Russia, China, the oil-rich Arab states and Israel itself. This approach is fundamentally different to previous attempts, because it is based on finding a solution before any final status negotiations. The EU should not only adopt this idea but promote it publicly as an official position. Guaranteeing money for resettlement will lure many Palestinians into thinking practically about this issue, rather than using it as a political tool. The EU must also emphasize that this is not a controversial idea, as past negotiations have been based on the premise of 242 and the concept of resettlement in the West Bank and Gaza.THERE ARE those who argue that while the solution to the problem is financial, with the right of return exercised inside the new Palestinian state, it is a solution that will be difficult to attain unless linked to a viable Palestinian state. If that is not achieved as part of a package, Palestinians and Arabs will feel they were “bought.” This is why it is absolutely critical that the resettlement of refugees should facilitate rather than obstruct the creation of a Palestinian state.Moving Palestinians out of refugee camps and into viable communities in their future state will also have a huge impact on the whole Arab community. Not only should the Arab world help the EU to fund this project, but it should give logistical and organizational support for a significant transfer of people. Arab states that have used the plight of the refugees to cover up for their own shortcomings can finally do something beneficial for the people who have been living in squalid conditions for decades.And Israel should welcome this development as it would help to mitigate the call for a return to Israel proper and ease some of the human rights claims against it. By taking the lead and raising money, the EU can assure the Israelis that all the money raised and the needed permits for construction will be for the sole purpose of moving Palestinians into their homeland in the West Bank and Gaza.The goal must be to change the current situation of the refugees, not by giving them aid, which is a major role for the UN, but by establishing the funding and grounds where they can start returning to their homeland by the thousands and investing in their new communities. For the 60 percent already living in camps in the West Bank and Gaza,this will mean working with the PA to pull their families out ofrefugee status and into proper housing. There is absolutely no reasonwhy refugees living in camps in the Palestinian territories undercomplete PA control – such as in Bethlehem – should continue to live inappalling conditions. Perpetuating their suffering for politicalreasons is unconscionable, especially when the lives of so manychildren are at stake.Resolving the refugee problem requires not only money from the EU, butabove all political and organizational know-how to overcome the manydetractors whose political fortunes depend on their continued plight.The writer is professor of international relations at theCenter for Global Affairs at NYU. He teaches international negotiationand Middle Eastern studies.