OK, I admit it. I was wrong. How could I have bought into all that idealistic nonsense at the start of the decade, about the prospects for Middle East peace? Why did I foolishly assume that Ehud Barak and Yasser Arafat had shattered taboos at Camp David in the summer of 2000? And why did I want so desperately to believe the two sides when they claimed, at Taba, in January 2001, that "significant progress had been made" and they had "never been closer to agreement"?

Perhaps the heady optimism of the 90s had seduced me. That was the decade of hope; of the Madrid conference, the Oslo accords and the historic handshake on the White House lawn. During his first stint as Israeli prime minister in the late 90s, even uber-hawk Binyamin Netanyahu agreed to territorial withdrawals at the Wye River summit.

That was then, this is now. Palestinians and Israelis remain locked in conflict. Netanyahu has returned to office, 10 years on, speaking only of a demilitarised Palestinian state and refusing even to consider allowing East Jerusalem as its capital. His far-right foreign minister, Avigdor Lieberman, who lives in an illegal West Bank settlement, has long been opposed to meaningful peace talks with the Palestinians. A decade that began with Bill Clinton bringing together Arafat and Barak to attempt to conclude the Oslo process, at Camp David, has ended with Barack Obama unable to persuade the government of Netanyahu and Lieberman to agree to a partial settlement freeze. On Monday, the Israeli housing ministry announced plans to build nearly 700 new apartments in occupied East Jerusalem.

It is time to acknowledge that the peace process, as we know it, is dead. There is no longer a two-state solution to the Israel-Palestine conflict. Why? Because, as Virginia Tulley wrote in the London Review of Books, "the conditions for an independent Palestinian state have been killed off by the inexorable and irreversible advance of the settlements". Or, to borrow an analogy from Palestinian lawyer Michael Tarazi: "It's like you and I are negotiating over a piece of pizza. How much of the pizza do I get? And how much do you get? And while we are negotiating it, you are eating it."

Consider the facts. According to Peace Now, there are 120 illegal Jewish settlements in the West Bank, with a settler population estimated at around 300,000. Some 200,000 Israelis live beyond the Green Line in occupied East Jerusalem – almost the same number as Palestinians allowed to reside within the city. The UN's office for the co-ordination of humanitarian affairs (OCHA) has calculated that settler numbers continue to grow at a rate of 5.5% a year – which is the equivalent of adding one a half bus-loads of new settlers each day to the 500,000 already living in the West Bank and East Jerusalem. On current trends, says the UN, the settler population is likely to double to nearly a million in the next decade.

Throw in Israel's infamous "facts on the ground" – the roads, barriers, checkpoints, buffer zones and military bases – and the settlement project takes up almost 40% of West Bank land. The past 10 years have seen the territory further fragmented, by Israeli soldiers and settlers, into a series of isolated enclaves, with Palestinian communities scattered around the West Bank, disconnected from one another and from the outside world. So, one has to wonder, what will emerge from any future negotiations? A Palestinian state or a bantustan? It is difficult to disagree with the verdict of the former UN secretary general, Kofi Annan, that settlement expansion is "the single biggest impediment to realising a viable Palestinian state with territorial contiguity".

Confronted by half a million settlers living on the territory of a future Palestinian state – one of whom includes Israel's own foreign minister – and another half a million on the way, I can no longer support an illusory two-state solution: on pragmatic, if not principled, grounds. The two peoples are so enmeshed and intermingled that I now believe the land can no longer be divided, it must be shared. The egg cannot be unscrambled.

In November, the chief Palestinian negotiator Saeb Erekat – a veteran of Madrid and Oslo – startled reporters in Ramallah when he too confessed it may be time for President Mahmoud Abbas to "tell his people the truth, that with the continuation of settlement activities, the two-state solution is no longer an option". The alternative left for Palestinians was to "refocus their attention on the one-state solution where Muslims, Christians and Jews can live as equals." Erekat added: "This is the moment of truth for us."

The truth is that the dream of "two states for two peoples", born in the 90s, died in the noughties. The two-state solution, the popular and principled option for so long now, is neither practical nor possible. In the words of Israeli academic Jeff Halper, "Israel by its own hand has rendered a viable two-state solution impossible." Its time has passed. So the moment has come, as we enter the teenies, to forget the idea of a Palestinian state existing side by side with a Jewish state, and to argue and agitate instead for the only remaining, viable and democratic option: a single, secular and binational state for Israelis and Palestinians. No longer "two states for two peoples", but "one person, one vote".

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