AS the two-state solution lies in intensive care, every so often convulsing with the last signs of life, key players are beginning to speak frankly. "I think that any Palestinian state is physically impossible and it will never be possible," declares one of the founders of Israel's settler movement, Daniella Weiss. "No more."
"We've won," says a high-ranking Israeli official when asked about the real state of the battle in the West Bank. "But what now?"
"We've given up on two states," a Palestinian doctor says. "Now it's all about how we position ourselves for one state."
Suddenly, a conflict that has bubbled away year after year is reaching a new, perhaps final, phase. The decision by 138 countries at the UN to support a Palestinian state - at least in UN status - has focused new attention on the conflict. Following that vote - Israel asked Australia to vote against the Palestinians, but Australia abstained - Israel announced its intention to proceed with a new settlement, E1.
The announcement set off a diplomatic storm, as the E1 has long been opposed by the US and Europe because it would cut the West Bank in half, making a Palestinian state barely feasible. Given Gaza is geographically separate, it would mean a state divided into three sections, with restricted access to East Jerusalem, which Palestinians want as their capital.
But while the international community keeps talking about a two-state solution, living here one realises that few Israelis or Palestinians talk about it any more.
The general feeling is that that window has closed. That idea has died. They are much more interested in a different question: What happens next? The recent flare-up of the conflict - Hamas at war with Israel, the Palestinian Authority winning a vote at the UN and Israel's announcement of the E1 - reflects frantic repositioning for the next phase.
Jewish settlements now dominate the hilltops in the West Bank. After 45 years, the settlement enterprise' continues but there appears to be little room to build more settlements, let alone a Palestinian state.
Settler leader Weiss says just as the settlements were planned strategically to prevent a Palestinian state, so are the outposts (which are illegal under Israeli law but generally allowed to stand) planned to fill the spaces.
"All the new outposts are all planned in a way that they will be in between the spaces that were left open," she tells Inquirer. "We now build outposts in the middle of existing communities so as indeed to prevent any possibility of establishing a sort of autonomy, independence, any sort of political form within this space between the Jordan River and the Mediterranean sea."
The reason the international community reacted with ferocity this week is that diplomats in Israel know the final piece of the jigsaw left open is the E1.
While the settlers appear to have won for the moment, the future looks more problematic for Israel. Because their birthrate is higher than that of Israelis, Palestinians could become the majority in a combined Israel, West Bank and Gaza within 15 years.
As the two-state solution disappears for Israelis, the influential pro-settler newspaper Makor Rishon has advocated the Canton Plan. Under this, Israel would declare Gaza an independent city-state and in the West Bank establish a series of cantons, or Bantustans. Israel would give these cantons tax concessions and they would be self-governed but their residents would have no vote in Israel's elections.
Another plan, floated by Defence Minister Ehud Barak, would be "withdrawal" from the West Bank, com but Israel would remain in Area C, which is 60 per cent of the West Bank - an annexation rather than a withdrawal.
The long period of settlements is having its consequences. "We have been settlers for 40 years," says Alon Liel, a former head of Israel's Ministry of Foreign Affairs.
"All the governments since then have settled, including in Jerusalem. We have reached the point now where the figures make it almost irreversible."
For Weiss and other leaders of the settler movement, that is something to be proud of. "The idea was specifically to block the option for the establishment of any other state inside the borders of the Land of Israel," she says.
If that was the masterplan, as Weiss says, then the E1 project announced this week is the final piece to block a Palestinian state.
These days, when the Israeli media writes about the two-state solution, it is as if it is writing an obituary.
In "The tomb of the two-state solution" a recent article in Israel's biggest-selling newspaper, Yedioth Ahronoth, Nahum Barnea listed those he believed were responsible for killing a Palestinian state. He included "the judges of the High Court of Justice throughout the generations", former foreign minister Moshe Dayan for his plan to house settlers in army camps in the West Bank, and the 40,000 Jews who have moved to the Palestinian territories since the end of the 10-month settlement freeze two years ago.
"These settlers are the real monument on the grave of the two-state solution," he writes.
Paradoxically, the fall in Israel's international standing - it could convince only eight countries to support it at the UN last week - comes as many Israelis believe they have settled the West Bank so heavily that a Palestinian state is impossible.
The Palestinians realise they are close to losing any chance of a state; Hamas is using this to argue for increased confrontation with Israel, while the Palestinian Authority has decided to go to the UN.
Israeli-Palestinian relations have been turned on their head. While Israel has almost no contact with the moderates - the Palestinian Authority - it has done two significant deals in the past year with Hamas, the militant group that runs Gaza.
Hamas and Israel recently did a deal on a ceasefire after an eight-day war, and another a year ago over the release of Israeli soldier Gilad Shalit. Hamas cites these deals to argue it is now the real power.
One of the reasons several countries, including Australia, this week summoned Israeli ambassadors in protest was because the E1 announcement was strategically critical and appeared to show Prime Minister Benjamin Netanyahu was using settlements as punishment.
Netanyahu gave a hint of this last year. After five settlers, including a baby, were murdered by two Palestinians, he said: "They murder and we build."
Settlements are an issue not just because they take land - often private Palestinian land - and are regarded as illegal under international law but they often lead to violence.
Some settlers now practice price-tag violence against Palestinians if they are not happy with a government decision. Settler leader Dani Dayan conceded recently: "Violence has become an acceptable currency in our camp. It comes in dozens of forms and we are silent." Dayan's comments were condemned by other, more hardline settlers.
"The settler leadership should not by any means criticise any element of settler behaviour, no matter how extreme it is," Weiss says. "The Arabs keep threatening our lives every day and every night. I very much believe in creating a situation where the Arabs are afraid of what we do."
Weiss, who helped establish Israel's first settlements from 1967, says she regularly met former prime minister Ariel Sharon and they planned settlements to prevent a Palestinian state.
Israeli historian Tom Segev says the Netanyahu government does not aim at a Palestinian state and has been pleased with the arrangement whereby the Palestinian Authority, under Mahmoud Abbas, administers the occupied territories.
"Israel has been able to house-train Abbas and seeks to prolong that arrangement for as long as possible," he says. "In turning to the UN, Abbas has broken the rules of the game, putting one of Netanyahu's major election theses in jeopardy. Hence Netanyahu's angry reaction."
Liel warns that if there are not two states there are two alternatives. "The first is that you end up having between four and 5.5 million Palestinians in your state," he says. "If you give them the right to vote you are no longer a Jewish state, because they fill the Knesset with their members.
"If you don't give them the right to vote, you have two types of people in your country: one which has the right to vote and one which does not. Then you are no longer a democracy.
"It is a very sad situation: you have to lose all your Jewish identity or all your democratic identity. I don't want to lose either."
