Incentives:
Given that these three points need to first be mitigated, any and all incentives provided have to occur once these issues have been largely allayed, while preparing the parties to embrace the overall framework for peace based on the API. In fact, providing any incentives prior to a period of reconciliation could undermine the effort to persuade both sides to make the necessary concessions for peace. Indeed, if they begin to benefit before making practical concessions, there will be no compelling reason to concede on anything, as has been the case in the past, and hope that their position could be further strengthened as time passes.
In an interview with Le Monde, French Foreign Minister Jean-Marc Ayrault stated following the June 3rd conference that "I am targeting two outcomes for this meeting [a follow-up international conference]: confirmation of the prospect of a conference with the parties by the end of the year and the creation of several working groups, one of which will be on the theme of economic incentives, e.g. the offer of a special partnership with the European Union and an association agreement for the future Palestinian State."
Foreign Minister Ayrault is absolutely correct to suggest that incentives are necessary to persuade both sides to come to terms with each other's rights and existence. These incentives, however, will not work unless, as stated above, they are preceded by a period of 18-24 months that allows for the mitigation of the three elements addressed above.
There is no doubt that finalizing a peace agreement would require significant incentives, and to that end the EU, along with the US, can offer the Palestinians the following, among other incentives: committing to raising billions of dollars to resettle and/or compensate the Palestinian refugees; and providing financial aid for the building of infrastructure throughout the Palestinian territories, in particular the building of schools, hospitals, and clinics, as these social and civic institutions are critical for the development of their future state. In addition, the EU can grant special provisions for Palestinian students to study tuition-free in European universities, provide guidance and assistance in the development of democratic institutions, and offer training and provisions for internal policing and security.
In regards to Israel, the EU can upgrade its association with Israel into a comprehensive partnership with increased trade and investments, and enhanced scientific and cultural links. In addition, the EU and the US can offer a financial aid package, similar to the 10-year plan currently being negotiated between the US and Israel, specifically for revitalizing debilitated, poverty-stricken areas in Israel, particularly those in urban locales.
Another potential incentive is establishing a special strategic association between Israel and NATO. Such an association would also provide a security umbrella to Israel, particularly in dealing with any potential threat from Iran. This measure will make it known that the US and the EU are prepared to come to Israel's aid against any material threat emanating from any source.
Conclusion:
Although a majority of Israelis and Palestinians realize the inevitability of coexistence and presumably understand the general parameters of a negotiated peace agreement, biased and selective perceptions, reinforced by historical experience and incompatible ideologies, have locked both sides into immobile positions. The factors that maintain and enhance these patterns include emotions such as fear, distrust, insecurity and illusions; the psychological outcome is mutual denial of the narrative of the other and mutual delegitimization. Put together, the operative result is stagnation and polarization.
What is therefore needed is a consensus-oriented dialogue and people-to-people interaction over a period of time, before they can sit and negotiate, to resolve the issues of perception -- a tall order given the current environment that buttresses rather than ameliorates negative perceptions. Yet, this remains the only starting point that could usher in a negotiating process to successfully end the Israeli-Palestinian conflict.
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