The Declaration of Principles so optimistically signed on the White House lawn in September 1993 proclaimed as its goal a "historic reconciliation" between the two peoples. Today, even optimists seem to hope only for a definitive separation of the two peoples behind high walls and fences.

Can Israelis and Palestinians really do no better than this? Might it not still be possible to blend the practical and psychological preferences of both peoples for a two-state solution with some of the best aspects of a humane one-state solution to produce a vision of a possible future so bright and appealing that both Israelis and Palestinians would be inspired to act on their hopes and dreams rather than their memories and fears and to seize this future together and make it a reality?

Sharing the Holy Land is not a zero-sum game in which any development advantageous to one side must be disadvantageous to the other. One can envisage a society in which, by separating political and voting rights from economic, social and residential rights in a negotiated settlement, both the legitimate national aspirations of Palestinians and the legitimate security interests of Israelis could be simultaneously satisfied.

The Holy Land could be a two-state "confederation", a single economic and social unit encompassing two sovereign states and one Holy City. Jerusalem could be an Israeli-Palestinian "condominium", an open city forming an undivided part of both states, being the capital of both states and being administered by local district councils and an umbrella municipal council.

All current residents of the Holy Land could be given the choice of Israeli or Palestinian citizenship, thus determining which state's passport they would carry and in which state's national elections they would vote. All citizens of either state could vote in municipal elections where they actually live, a matter of particular relevance to current Palestinian citizens of Israel opting for Palestinian citizenship and to Israeli settlers choosing to continue to live in Palestine while maintaining their Israeli citizenship. Each state could have its own "law of return" conferring citizenship and residential rights within that state on persons not currently resident in the Holy Land.

Borders would have to be drawn on maps but would not have to exist on the ground. The free, non-discriminatory movement of people and goods within the Holy Land could be a fundamental principle subject only to one major exception: To ensure that each state would always maintain its national character, the right to residence in each Holy Land state could be limited to that state's citizens, to citizens of the other state residing there on an agreed date and to their descendants. (In this way, deeply felt principles could be maintained. Israelis could have the right to live in all of Eretz Israel - but not all Israelis in all of Eretz Israel. Similarly, Palestinians could have the right to live in all of historical Palestine - but not all Palestinians in all of historical Palestine.) A common currency (perhaps printed in Hebrew on one side and Arabic on the other) could be issued by a common central bank.

To ease Israeli security concerns, the Palestinian state could be fully demilitarized, with no one other than Palestinian police allowed to bear arms within its territory. As an essential counterpart to the absence of border controls within the Holy Land, Israel could conduct immigration controls for entry into Israel, at the same time that Palestine conducts immigration controls for entry into Palestine, at the frontiers of the Palestinian state with Egypt and Jordan, with any non-Palestinian visitors restricted to the Palestinian state by the Israeli authorities facing penalties if found in Israel. The settlement agreement could be guaranteed by the United Nations and relevant states, with international tribunals to arbitrate disputes regarding compliance with its terms.

The status of Jerusalem poses the toughest problem for any settlement plan, causing many to assume, for this reason alone, that no settlement acceptable to both sides can ever be reached. When the UN General Assembly adopted Resolution 181 in 1947, it addressed the problem by suggesting an international status for Jerusalem, with neither the Jewish state nor the Arab state to have sovereignty over the city. Yet joint undivided sovereignty, while rare, is not without precedent.

Chandigarh is the joint undivided capital of two Indian states. For half a century, Sudan was a condominium of Britain and Egypt, officially named "Anglo-Egyptian Sudan". For more than 70 years, the Pacific Islands state of Vanuatu (formerly the New Hebrides Condominium) was under the joint undivided sovereignty of Britain and France. For more than 700 years, until a 1993 constitutional revision, the Principality of Andorra was under the joint undivided sovereignty of French and Spanish "coprinces". In March 1999, the arbitrator appointed by the International Court of Justice ruled that the contested Bosnian municipality of Brcko should be a condominium shared by Bosnia's Serb Republic and its Muslim-Croat Federation.

As a joint capital, Jerusalem could have Israeli government offices principally in its western sector, Palestinian government offices principally in its eastern sector and municipal offices in both.

A system of districts or French-style arrondissements could bring municipal government closer to the different communities in the city (including the ultra-Orthodox Jewish community), with local district councils dealing with all matters best dealt with locally and an umbrella municipal council dealing only with those matters requiring citywide coordination. To the extent that either state wished to control people or goods passing into it from the other state, this could be done at the points of exit from, rather than the points of entry to, Jerusalem. In a context of peace, particularly one coupled with economic union, the need for such controls would be minimal.

In a sense, Jerusalem can be viewed as a cake that could be sliced either vertically or horizontally. Either way, both Israelis and Palestinians would get a share of the cake, but, while many Israelis could never voluntarily swallow a vertical slice, they might just be able to swallow a horizontal slice. Indeed, by doing so, Israel would finally achieve international recognition of Jerusalem as its capital. Embassies to Israel, all of which are currently located in Tel Aviv in a reflection of the nonrecognition by the international community of Israel's claim to sovereignty over Jerusalem, could be expected to move there.

Jerusalem is both a municipality on the ground and a symbol in hearts and minds. Undivided but shared in this way, Jerusalem could be a symbol of reconciliation and hope for Jews, Muslims, Christians and the world as a whole. It would be so even if the "condominium" principle of joint undivided sovereignty were formally applied only to the contested heart of Jerusalem, notably the Old City and the Mount of Olives, with sovereignty over the other parts of an open city being assigned to one or the other of the two states.

Such a framework would address in ways advantageous to both sides three of the principal practical problems on the road to peace - Jerusalem (through joint sovereignty over an undivided city), settlers (through a separation of citizenship rights from residential rights in a regime of free access to the entire Holy Land for all citizens of both states under which no one would be compelled to move) and borders (through a structure of relations between the two states so open and nonthreatening that the precise placement of borders would no longer be such a contentious issue and the internationally recognized pre-1967 borders - subject only to the expanded borders of Jerusalem, under joint sovereignty - might well be acceptable to most Israelis, as they would certainly be to most Palestinians).

For Jewish Israelis, the rapidly approaching inevitability of living in a state with either a majority of Arab voters or an inescapable resemblance to pre-1990 South Africa and worldwide pariah status would be replaced by the assurance of living in a democratic state with fewer Arab voters than today. Israel's security would be enhanced by assuaging, rather than continuing to aggravate, the Palestinians' grievances and the hatred throughout the Arab and Muslim worlds based upon the perpetuation of those grievances. By escaping from the role (so tragic in light of Jewish history) of oppressors and enforcers of injustice, Israel would save its soul and its dreams.

For all Palestinians, human dignity would be restored. They would cease to be a people treated (and not only by Israelis) as uniquely unworthy of basic human rights. For those in exile, an internationally accepted Palestinian citizenship, a Palestinian passport and a right to return to all of pre-1948 Palestine, if only to visit, would have enormous significance.

Furthermore, if the Palestinians themselves accepted a settlement, all Arab states would establish normal diplomatic and commercial relations with Israel, as has been made clear in the Arab Peace Initiative of 2002, which remains on the table, waiting to be seized by Israel. If a Palestinian flag were peacefully raised over Palestinian government offices in Jerusalem, few Arab or Muslim eyes would still see Israel through a veil of hatred. The immovable obstacle to a lasting region-wide peace would have been removed.

While implementation of such a framework for peace would be relatively simple (far more so than traditional "two-state solutions" premised on the separation of Israelis and Palestinians), its acceptance would require a moral, spiritual and psychological transformation from both Israelis and Palestinians. Yet, given the decades of hatred, bitterness and distrust, aggravated by the past 17 years of a failed and seemingly perpetual "peace process", any settlement would require such a transformation.

Precisely because such a transformation would be so difficult, it is far more likely to be achieved if both peoples can be inspired by a truly compelling vision of a new society of peaceful coexistence, mutual respect and human dignity, in which both peoples are winners, than if they are left to contemplate painful programs for a new partition and an angry separation in which both peoples must regard themselves, to a considerable degree, as admitting defeat.

Israelis, Palestinians and the true friends of both must now resist the temptation to despair, raise their sights and pursue a compelling vision of a society so much better than the status quo that both Israelis and Palestinians are inspired to accept in their hearts and minds that peace is both desirable and attainable, that the Holy Land can be shared, that a winner-take-all approach produces only losers, that both Israelis and Palestinians must be winners or both will continue to be losers and that there is a common destination at which both peoples would be satisfied to arrive and to live together.