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The way I see it, we’ve come up with several somewhat realistic solutions, though one each has an obvious downside:
1) Give part (or some suggest even all) of our land to the Palestinians, in the hopes that this will appease them.
Obvious downside: We gave them Gaza, and all that did was make them more eager and more capable of butchering us, R”L. Is it realistic to expect a handover of the West Bank, forget all of Israel, to end differently?
2) Annex either most or all of the West Bank.
Obvious downsides: This would require offering over 2 million Arabs Israeli citizenship, which would drastically change the demographic reality and seriously undermine the Jewish character of the state (which currently consists of approximately 6 million Jews and 1.7 million Arabs). Also, the international response would probably be condemnation and sanctions on a scale not seen since Iran, which would likely leave Israel a pariah state with its economy in shambles. (And that’s not even taking into account the reactions of Hamas, Fatah, Hizballah, etc.)
3) Continue the status quo.
Obvious downsides: Wars and “intifadas” erupting on an almost regular basis, a constant stream of terrorist attacks, and mounting international pressure.
There is certainly no ideal option here. The question is, which is the lesser of the evils?