Israeli Prime Minister Ehud Olmert shakes hand with Palestinian President Mahmoud Abbas, prior their meeting at Olmert's residency in Jerusalem on February 19, 2008. (Thaer Ganaim, Maan Images)

Frustrated by years of on-and-off peace talks with Israel, Palestinians are losing hope for an independent homeland, and some are proposing a radically different cause: a shared state with equal rights for Palestinians and Jews.

A "two-state solution" has been the basis for Israeli-Palestinian negotiations for nearly 15 years and remains the declared aim of both groups' highest elected leaders and the Bush administration. But its advocates are increasingly on the defensive, and not just against militant Islamists and Jewish settlers who have long opposed partitioning the land.

Majorities on both sides dismiss the current U.S.-backed peace talks as futile. And a small but growing number of moderate Palestinians contend that Israel's terms for independence offer less than they could gain in a single democratic state combining Israel, the West Bank and the Gaza Strip.

As a result, the 60th anniversary this month of Israel's birth is a time of insecurity and flux. Conventional wisdom about the long-standing formula for peace is being turned on its head.

No Israeli leader accepts the idea of sharing power with Palestinians; nor has such a plan been offered to the Israeli government. But a collapse of the two-state effort would leave Israel in de facto control of a region where by the next generation, Jews probably will be a minority.

That scenario inspires Hazem Kawasmi, who recently gave up on the two-state ideal and runs brainstorming workshops in the West Bank on single-state proposals.

Sooner or later, the former Palestinian Authority official predicts, the growing burden of occupation and threat of Islamic extremism will make Israelis receptive to the idea of a bi-national system that protects the rights of Jews.

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"Israel cannot be a dominating power forever," Kawasmi, 43, said between puffs on a water pipe in a cafe in Ramallah, the West Bank's administrative center. "Time is on our side."

Israel captured the West Bank and Gaza in the 1967 Middle East War, but efforts to incorporate the territories by encouraging massive Jewish settlements fell short. It took a generation after the war for Israeli and secular Palestinian leaders to recognize each other and start discussing statehood for the occupied territories.

The Palestinians' rethinking of that goal has been influenced by Hamas' ascendancy. Its rise has unnerved moderate Palestinians who don't want to be ruled by the militant Islamic group and made many in Israel, which Hamas refuses to formally recognize, more averse to a two-state accord.

The near-daily rocket attacks from Hamas-controlled Gaza have turned Israel's defense minister into a powerful critic of a peace process he once led.

U.S. Secretary of State Condoleezza Rice, struggling to propel peace talks between Israel and the Palestinian Authority led by the secular Fatah movement, warned last week that the lack of progress was causing younger Palestinians to give up on the goal of an independent state.

"Increasingly, the Palestinians who talk about a two-state solution are my age," said Rice, who is 53.

The U.S. revived the peace talks in November with the aim of an accord by the end of President Bush's term, but disillusionment set in quickly. Hebrew University and the Palestine Center for Policy and Survey Research reported that three-fourths of the Palestinians and just over half the Israelis they polled in March said the talks serve no purpose and should be halted. Other polls show that at least one-fourth of Palestinians favor a single state.

"The number of people who believe in two states for two peoples is decreasing, and that worries me," said Yasser Abed-Rabbo, a Palestinian official involved in the talks. "And I'm talking about a circle of rational intellectuals, people with an open mind. On the street, the two-state idea has become a joke."

Fatah's leadership has begun a quiet, informal debate of its options if talks for an independent state fail.

The emergence of one-state proposals, said Kadura Fares, a member of Fatah's revolutionary council, are "a sign that the current strategy has been exhausted and it's time to rethink all our goals."

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