Israel needs the two-state solution not to please the gentiles, but because of Jewish values, and the lessons of Jewish history.
It was a matter of time, and the writing has been on the wall. The Palestinians have warned a number of times that if negotiations would not move forward, they would resort to either of two strategies: the first is to dismantle the Palestinian Authority and to hand Israel the responsibility for administering the West-Bank; the second is to ask the United Nations to recognize a Palestinian State within the 1967 borders.
Fortunately for Israel, the second strategy looks more likely now. Argentina's Cristina Kirchner has joined Brazil's Lula and recognized the Palestinian state. They probably set the precedent that will draw in more South American countries, and many countries of the Third World. Quite a few Western countries will be happy to join. Soon the Palestinians will be certain to have a majority in the UN General Assembly and will ask for recognition, learning from the Zionist movement that achieved the same on Nov. 29, 1947.
Is this bad for the Jews? I don't think so, even though it would be vastly preferable for Israel to strive actively towards the implementation of the two-state solution rather than being dragged into it kicking, screaming and haggling for more gifts from Uncle Sam for a ninety day settlement freeze.
But, the self-appointed defenders of Israel's interests from the right will argue, "This is naive! Bibi has been vindicated by the last installment of Wikileaks; we all know now that the Palestinian problem is not the real issue in the Middle East! The real problem is Iran! We can now finally convince the world that they should stop pressuring us on Palestine!"
Well, it's time to clarify something. Those of us who have, for decades, argued that Israel needs to stop ruling the Palestinians have, in the last years, reverted to arguing that this is in Israel's interest because Israel is maneuvering itself into unprecedented international isolation. But this was basically a rhetorical ploy to reach narrow-minded right wingers.
The real reason why Israel needs the two-state solution is not that we want to please the gentiles. The true motivation for insisting on the two-state solution is that we want this state to have a Jewish character. By Jewish we don't mean that it should be a theocracy; or that it should give Jews more rights than to Arabs. We mean that the State of Israel must learn the lesson of the history of persecution that Jews have endured for two Millennia.
This persecution was due to one of the most unpalatable characteristics of human nature: to think and feel in tribal terms. Jews were persecuted because they had a different religion; because they behaved differently, and because they insisted on their right to determine their own identity. First we were persecuted on religious grounds, then on spurious racial conceptions of purity.
It has taken humanity most of history, including the Holocaust, to come to realize that we need a conception of human rights that transcends the boundary of all nation states. The overwhelming majority of Jews around the world have enthusiastically embraced this idea. If only the world had reacted to the Nazis the way they, belatedly, reacted in Bosnia and, just in time, in Kosovo! If only it had been clear then that all human beings, never mind their color or creed, have the same rights!
But, the standard right-wing interlocutor will say, "This whole conception of human rights is a sham! Look at Iran; look at Saudi Arabia; look at Egypt; look at Hamas; they keep using the notion of human rights while trampling them in their own countries. Why should we be the ones that take the idea of universal human rights seriously?"
The answer is simple: because it is based on universal justice. We Jews pride ourselves that we have upheld notions of justice as non-negotiable; that we have always believed that ethics is not a matter of power, but of objective goodness. That's why Jews played a central role in the Civil Rights movement in the US; that's why Jews fight against racism and other forms of discrimination all over the world. The argument, 'but others don't behave as they should', has never been the Jewish way of thought.
Hence, it is a pity if Israel will have to be dragged into the two-state solution by international pressure rather than moving there on its own initiative. The Jewish people has survived because it has never believed that might is right; because it has insisted that there is no compromise on issues of principle. I firmly believe that the current wave of nationalism sweeping Israel is but a brief historical episode; that the majority of Israelis have been swept into it by panic, manipulated by professional fear-mongers. Once we return to the Jewish tradition of tikkun olam, of sticking to principle rather than being guided by fear, we will reconnect to our historical source of strength.