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PM: Thank you. I explained yesterday to Chancellor Merkel that we have been following the same policy for close to 45 years – that is, all Israeli governments have built in the Jewish neighborhoods of Jerusalem and in what are called the settlement blocs, which are really suburbs of Jerusalem and Tel Aviv, where roughly 90% of Israeli citizens live in Judea and Samaria, in these suburbs that are very close to both Tel Aviv and Jerusalem. So that's not a new policy, and in this sense from previous governments to me, there's no change and there hasn't been a change.

The second point is about E1: This is a small corridor between one of these suburbs east of Jerusalem – about 40,000 people live there. It's about two miles from Jerusalem. Successive governments from Yitzhak Rabin on down to my predecessor, Mr. Olmert, have also said that this will be incorporated in a final peace treaty between Israel. The curious thing is that most governments who have looked at these suggestions, these proposals over the years, including the Palestinians themselves as revealed in leaked documents, understand that these blocs, these arrangements are going to be part of Israel in a final political settlement of peace. So I have not changed the policy. This is a consistent policy. My hope is that, as the dust settles, President Abbas decides to abandon unilateralism, as he went to the UN unilaterally – to abandon it, to return to the negotiations. We have our position; they have their positions. The only way to really resolve them is to do what the Chancellor and I did last night, and it's a long process. You have to sit down and you have to discuss these differences and to see if you can come to a resolution. I think, what the Chancellor told me last night, it doesn't happen overnight. It takes time.  Certainly between friends we can have disagreements, but we our friendship is solid and we understand that. With adversaries or former adversaries, it takes more time, but you can't finish a negotiation unless you start it. And Israel was and remains prepared to begin such direct negotiations without preconditions.

Q:  …Prime Minister Netanyahu, we heard last week in Israel that somebody in the Foreign Ministry said after the vote in the UN that we lost Europe. Is that your conviction? And if so, how do you get Europe back? Thank you very much.

PM: Thank you. Look, I don't think we lost Europe when we have virtually universal support for our defensive operation in Gaza against the rocketing of our civilians by Palestinian terrorists. I think there was virtually universal support.  There is obviously a difference of view in Europe on the issue of settlements because most Europeans believe that the issue, the root cause of our conflict with the Palestinians is the settlements. The settlements issue is one that has to be resolved in negotiations, but it is not the root cause of our conflict because this conflict was waged from the areas adjacent to Israel for 50 years before there was a single settlement.

The attempt to wipe out the Jewish state was conducted from 1920 to 1967, 47 years, when there wasn't a singer Israeli settlement or a single Israeli soldier in the West Bank or in Gaza. Having departed these territories, for example from Gaza, the attacks continue on Israel. Why? Why are they rocketing Israel? We left Gaza. The answer is that those who oppose Israel, oppose Israel in any boundary. If it was merely a territorial question, we would have resolved it long ago. And I believe that we still have to exhaust the possibility that we'll have a partner who really wants a territorial solution and is not existentially opposed to Israel's presence there in any boundary. I think the root cause is not the settlements; it's an issue to be resolved. The root cause is the opposition to the State of Israel in any border. I hope that we can engage at least part of the Palestinian people in a discussion about mutual coexistence, about mutual peace, about two states for two peoples, about a Jewish state living next to a Palestinian state, about security borders for Israel. This is our task.

 Now, I haven't given up on it, and I'll tell you the best proof that I haven't given up on that and in trying to persuade fair-minded, decent people and decent leaders in Europe, the best proof that I believe that that is a worthwhile and achievable objective is that fact that I am here and will continue to work with Chancellor Merkel and with her government, to see how we can advance this realistic peace. We don't give up so quickly, on anything.

 Q:  Yes, my question to Madam Chancellor first: Is Germany considering any other steps against Israel if Israel does continue with settlement expansion? And my question to Prime Minister Netanyahu, if you're willing, in Hebrew please, can you explain what caused this change of position within Europe in only two weeks?

 PM: Thank you. Look, I think there is a lot of room for discussion and for seeking new ideas, because we haven't been able to break the mold. I suppose there is frustration in Europe that we haven't resolved the Palestinian problem, but remember that there have been six Israeli Prime Ministers since Oslo who have been unable to sign a peace accord with the Palestinian Authority, and it's not because of lack of trying from Yitzhak Rabin, through Shimon Peres, through myself to Ehud Barak and then Ariel Sharon and Ehud Olmert. Believe me, there were many generous offers that were given. Sometimes I think that, in their desire to see a quick fix to the problem, many European governments can be frustrated but, as I said, I never lack the patience or the willingness to discuss with any fair-minded and decent leaders, and there are quite a few, to discuss the facts: how often we have been prepared to sit down the Palestinians and negotiate; what kind of steps Israel has taken, including my own government, for the sake of advancing peace. And you know, I think that the more as people look at this and we actually have a discussion, then they see that maybe there's a timidity on the Palestinian side, that they have not yet engaged in these kinds of direct negotiations, and as I say, the most important thing is that that peace will not be decided, not in the United Nations in New York, and not in Europe. It will be decided between Jerusalem and Ramallah, and the only way to advance that is to have those direct negotiations.

 Q: …And Prime Minister, are you less disappointed about the German abstention now that you talked to the Chancellor?

 PM:  If you'd read the full quote, it began actually with my expression of appreciation for Chancellor Merkel's forthright support for Israel in our recent operation in Gaza, and by the way, it made a difference. I think it also helped us achieve a ceasefire, that kind of strong international support, which I thought it was very valuable. I then said that, even though I was disappointed with the German abstention, I knew that what guided Chancellor Merkel was her belief that this would somehow advance peace. My own regrettable comment is that the resolution, notwithstanding the intent, hardens Palestinian positions and may make it more difficult to enter into the direct negotiations that we all wish for. But I have no doubt about Chancellor Merkel's commitment to Israel – none whatsoever.