The prime minister endorsed the creation of a Palestinian state that would exist alongside Israel for the first time on Sunday. Two and a half months after taking office and following considerable pressure from Washington, Prime Minister Benjamin Netanyahu finally uttered the coveted term in his policy speech at the Begin-Sadat Center for Strategic Studies at Bar Ilan University.

However, Netanyahu repeatedly stressed, any such entity would have to be demilitarized. "The territory under Palestinian control must be demilitarized with ironclad security provisions for Israel," the prime

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minister said.

"If we receive this guarantee regarding demilitarization and Israel’s security needs, and if the Palestinians recognize Israel as the State of the Jewish people, then we will be ready in a future peace agreement to reach a solution where a demilitarized Palestinian state exists alongside the Jewish state," he said.

Vowing to speak in plain terms about the complicated issues at hand, Netanyahu spoke firmly on the demand that Israel make more territorial concessions.

"Many good people have told us that withdrawal from territories is the key to peace with the Palestinians. Well, we withdrew. But the fact is that every withdrawal was met with massive waves of terror, by suicide bombers and thousands of missiles... The claim that territorial withdrawals will bring peace with the Palestinians, or at least advance peace, has up till now not stood the test of reality.

"Those who think that the continued enmity toward Israel is a product of our presence in Judea, Samaria and Gaza, is confusing cause and consequence. The attacks against us began in the 1920s, escalated into a comprehensive attack in 1948 with the declaration of Israel’s independence, continued with the fedayeen attacks in the 1950s, and climaxed in 1967. All this occurred during the fifty years before a single Israeli soldier ever set foot in Judea and Samaria."

'I will go to Damascus, to Beirut'

On the issue of settlements and outposts in the West Bank the prime minister touched on only briefly, saying that Israel has no intention of expropriating land to build new settlements but that there is a need to allow settlers to live "normal lives" - alluding to the demand of 'natural growth' within the existing settlements.

Answering US President Obama's statement in Cairo that Israel was built as a result of the Holocaust, Netanyahu said - "The right of the Jewish people to a state in the land of Israel does not derive from the catastrophes that have plagued our people. There are those who say that if the Holocaust had not occurred, the state of Israel would never have been established. But I say that if the state of Israel would have been established earlier, the Holocaust would not have occurred.

"This tragic history of powerlessness explains why the Jewish people need a sovereign power of self-defense. But our right to build our sovereign state here, in the land of Israel, arises from one simple fact: this is the homeland of the Jewish people, this is where our identity was forged.

However, Netanyahu also said that Israel must recognize that millions of Palestinians live in the heart of the West Bank, and continued control over these people is undesirable. "In my vision, there are two free peoples living side by side each with each other, each with its own flag and national anthem," he said.

The prime minister declared that the solution of the Palestinian refugee problem must be "outside Israel," and drew a parallel to the expulsion of hundreds of thousands of Jews from their native Arab nations with the creation of Israel and their subsequent absorption in Israel. "The Palestinian refugee problem must be resolved outside the borders of the state of Israel. On this, there is a broad international consensus," Netanyahu said, adding that with international investment this "humanitarian problem" can be solved.

Netanyahu also called for Arab leaders to meet him and contribute to Palestinian economic development. "I support the idea of regional peace that is being led by (US President) Obama," Netanyahu said. "I appeal, from here this evening, to the leaders of the Arab states and say: Let's meet. Let's talk peace. Let's make peace. I am willing to meet with you any time, any place - in Damascus, in Riyadh, in Beirut."

Activists from both sides of the political spectrum gathered at the Bar Ilan campus Sunday evening in anticipation of Netanyahu's speech. Some of the protestors were demanding a halt to all settlement activity while others demanded its expansion.

Right-wing activists, including Itamar Ben-Gvir, condemned US President Barack Obama and some carried signs saying: "Barack Hussein Obama – an anti-Semite and hater of Jews". They also called for more settlements in the West Bank.