I believe that Israel must concede to the Palestinian right of return in principle. Israel must, first of all, assume its responsibility for what happened in 1948, as far as we are to blame - and we are to blame for a great part of it, if not for all - and we must recognize in principle the right of refugees to return.

There are lots of grounds for hope in Israeli society. We are seeing Israelis getting fed up with war, looking for solutions. The youngest soldiers are refusing to serve in the Occupied Territories. Some are volunteering for army combat units but are refusing to serve in the Occupied Territories. We have the elite of the Israeli army, the air force pilots, some of them refusing orders which they consider illegal.

How do we solve the problem by allowing a number of refugees to return to Israel, allowing a number of refugees to return to the Palestinian state, and allowing a number of refugees to settle, with general compensation, where they want to settle? It is not an abstract problem. It involves four million human beings, and more than fifty years of various sorts of misery. But it is not an insolvable problem. It involves some good will, and a readiness to give up historic myths on both sides.

I have always been conscious of the importance and the strength of nationalism, and this has led me straight to the acknowledgment of the nationalism of the Palestinian people. I believe there is no way around this: We have to have a solution based on two national states, which will hopefully live and grow together and establish a relationship between them in something like a European Union.

If you are a Jewish Israeli, you go to Gaza, you get the villa of your life, the villa which you did not dream of ever getting in Israel, a beautiful two-story villa with green meadows and so on, practically for nothing. Then you put up hothouses of tomatoes or flowers; you take the very Arabs from whom you grabbed this land and employ them as laborers in your hothouses. Israeli law does not apply in Gaza: There is no minimum wage, no annual vacation, no compensation for dismissal - so you get the work very, very cheap. It is a wonderful setup economically.

What is the alternative to peace? A catastrophe for both peoples [Palestine and Israel].

You must get Israelis to understand the feelings and the hopes and the traumas of the Palestinians. You have to get the Palestinians to understand why Israel is behaving the way it does: What is the legacy of the Holocaust, what are the fears of average Jewish people?