A Palestinian state, a divided Jerusalem, a land swap and a special force for the Old City of Jerusalem were all part of the vision for a final-status settlement put forward by Defense Minister and Labor Party Chairman Benjamin Ben-Eliezer to his party's central committee Wednesday at Kibbutz Shfayim, north of Tel Aviv.

Adopting much of the plan put forward by former U.S. President Bill Clinton Plan at the Camp David Summit in July 2000, Ben-Eliezer spoke of a two-state solution to the conflict with a divided Jerusalem.

"The plan I am talking about is based primarily on a vision - a vision of two states, living side-by-side in peaceful co-existence - Israel and Palestine," Ben-Eliezer told the Labor Party members to loud applause.

"The Palestinian state will be established on the vast majority of Judea and Samaria [the West Bank] and Gaza," said Ben-Eliezer, adding that it would would enjoy territorial continuity. "Israel will also be open to a territory swap with the Palestinians," he said, referring to land close to the Green Line where settlements are located and which Israel would want to keep.

West Jerusalem and the Jewish neighborhoods of East Jerusalem would form Israel's internationally-recognized capital, while the Palestinians would receive control of the Arab areas of East Jerusalem. Ben-Eliezer said it was in Israel's interests to relinquish control of the Arab neighborhoods in East Jerusalem, otherwise the Jewish majority in the capital would be threatened.

The Old City and the holy sites should be administered by a special force that would recognize the importance of these places to all sides, said Ben-Eliezer. There would be no final sovereignty over the Temple Mount, but rather an arrangement that was acceptable to all sides.

The Labor leader said he adamantly ruled out the right of return for Palestinian refugees, though said that under a final-status agreement, Israel would evacuate some settlements. The majority of settlers would live in settlement blocs that would be annexed to Israel.

Ben-Eliezer admitted that he did not view Palestinian Authority Chairman Yasser Arafat as a partner for talks on a final-status agreement, but pointed out that if Israel were to present its "political vision," this would serve as a lever to pressure Arafat to abandon terror.

The proposal put forward by Saudi Crown Prince Abdullah and adopted in March by the Arab League, he said, should be included in any political vision, though Israel should not accepted it verbatim. (The Saudi plan proposes Israeli withdrawal from the West Bank and Gaza Strip in exchange for full normalization.)

Ben-Eliezer's plan envisions negotiations aimed at establishment of a Palestinian state on most of the territory of the West Bank and Gaza, with Israel annexing settlement blocs near the Green Line border with the West Bank. But the defense minister said that he did not believe in rigid timetables and that they would not necessarily help advance the process.

Ramon: Israel must unilaterally separate from Palestinians

Speaking after Ben-Eliezer, MK Haim Ramon outlined an alternative political solution, based on the idea of unilateral separation. Ramon, who plans to challenge Ben-Eliezer for the party leadership, said that in the absence of a Palestinian peace partner, Israel had to act unilaterally.

"Ehud Barak tried to reach final borders through negotiation," said Ramon. "He was prepared to make very generous compromises, but it didn't succeed. Not because of us, but because of Arafat. A unilateral border will serve as the border until there is someone to talk to [on the other side]."

Ramon criticized Ben-Eliezer for outlining a final status peace plan, saying Labor should not be arguing over arrangements in Jerusalem, when there was noone to talk to on the Palestinian side at present. "We are talking about how to divide Jerusalem, while they are killing us. It's a political mistake."

As part of a plan that would also include dismantling settlements, Ramon said Israel had to establish a border with the West Bank unilaterally, and had to withdraw its troops from much of the West Bank and the Gaza Strip. "All of the IDF's losses are inside the Strip," he said. "The fence prevents infiltrations. But we are inside Gaza. We do not need a [Palestinian] partner in order to get out. And the same goes for Judea and Samaria."

If Israel waited for a peace partner, and did not move unilaterally to separate from the territories, Ramon warned, the country would be in danger of becoming "like South Africa," where a Jewish minority rules over an Arab majority in the area between the Jordan River and the Mediterranean Sea.

Former prime minister Barak said that Arafat, with international backing, must be brought back to the negotiating table "to the point before he turned to terrorism."

Barak also called for "security separation" between Israel and the Palestinians. "The fence around Gaza prevents suicide attacks inside Israel," he said. "There is no explanation as to why Israel cannot build a bigger, ten-times longer fence, and close off Israel and the settlement blocs [in the West Bank]," he said.