A new study published by the Peres Center for Peace argues that economic peace, though a helpful tool, cannot replace a political solution with the Palestinians.

The study was released last week at a special conference on the topic at Tel Aviv University, following a meeting between Vice Prime Minister Silvan Shalom and Palestinian National Economy Minister Bassim Khoury.

The study, co-written by Adi Ashkenazi and Barak Greenapple of the Peres center's business and economics department, sought to determine to what degree economic peace should play a role in the overall peace process, and to replace the generalities with which the term economic peace is usually described with concrete measures and tangible targets according to which government officials could act.

Ashkenazi, who prior to joining the Peres center was the head of the IDF's West Bank and Gaza Strip Civil Administration Economic Branch, challenged the assumption that merely pumping money into the Palestinian economy would increase willingness for peace.

He recalled that back in 1999, the term "the cost of loss" was thrown around liberally.

"The reasoning was that by developing the Palestinian economy, increasing wages, starting businesses and improving their quality of life, the Palestinians would have something to lose and the cost of walking away from negotiations would be very high, so that on the day when the people want to rise up, the business leaders and the politicians would step up to calm things down," explained Ashkenazi.

What followed was a period of rapid economic expansion that saw a multitude of joint projects, increased tourism, skyrocketing GDP, five consecutive years of nine percent growth and improved bilateral relationships.

"And then came the surprise that caught both us and the Palestinians off-guard. Someone, most likely Arafat, lit a spark... the spark lit a flame, which in the midst of [an] unprecedented economic flourishing, set the Palestinian economy back 50 years, pushing the economy down by 40%. The 'cost of loss' proved an ineffective deterrent."

To further prove his point, Ashkenazi told a story about the experience of a Palestinian strawberry farmer who owned a field in Gaza, close to the Israeli border.

When the second intifada broke out, militia gunmen approached him and told him that they needed to use his field to fire rockets at Israel. When he refused, they shot his son in the knee.

"When I heard this, I realized that 'the cost of loss' is fine until nationalism raises its head. And in 2000, at the height of prosperity, nationalism overcame everything else. The people who we counted on simply couldn't face the power of the radicals."

This convinced Ashkenazi that economic measures were only helpful within limits.

"The are margins within which every shekel that you add will have a beneficial value in terms of promoting the will for peace, and there are margins where the value is either zero or negative," he said.

"There is a limit beyond which no amount of money will help. The limit is the Palestinian political will for a state of their own... No matter how much the economic condition improves, the Palestinians will not give up on the core issues of the right of return, Jerusalem and permanent borders," he said.

Ashkenazi said this realization should spur the government to action.

"Don't try to buy us off with empty slogans that we all know won't work. Economic peace is a great supporting tool, but it won't do the trick by itself.

"I say go, sit and talk to each other until white smoke comes out. The final result is already known, it's not worth the blood that will be shed."

And according to Ashkenazi, time is short.

"If you ask me, we are on the verge of a new intifada. The conditions are ripe - economic awakening combined with political despair. Those were the causes of [past intifadas], and I see no reason for it not to happen again," he said.

"The general feeling of complacency, that everything is fine as it is, is what will lead to the outburst."

Ashkenazi went on to explain how, despite everything, the economic process should be carried out.

His study focused on five main areas in which improvements could help lead to better chances at peace. The five areas were: employment of Palestinians in Israel, developing industrial zones in the West Bank, opening the way to trade, improving infrastructure and investing in tourism.

All five points were accompanied by analyses and a list of recommendations for implementation.

"Every plan that is put forward has to hold [to] four basic principles," said Ashkenazi.

First of all, he said, every plan needed to be implemented across the board. To make a real impact, one that would be felt on the ground, you can't do it little by little, he said.

Second, put down rigid timetables that would put pressure on everybody. Third, choose to focus on the projects with the best chances of early realization, to create success stories, and finally, focus heavily on creating jobs.

"Employment, more than merely an economic problem, is a serious social problem. It is a problem that leads people to the mosques and eventually returns to haunt you," he said.

Ashkenazi presented the main findings and recommendations to the Israeli and Palestinian ministers as well as foreign diplomats and local businesspeople in last week's conference. There, it was also announced that he would be leaving the Peres Center to join the newly reopened Regional Cooperation Ministry under Silvan Shalom.

Ashkenazi will be the head of the economic division in the ministry.

The mission of the business and economics department of the Peres Center is to strengthen the economic relations between Israel and the Arab world. To do this, it initiates joint Arab-Israeli business-to-business activities, engages Arab and Israeli businesspeople in a variety of activities and events, assists individual companies in conducting cross-border trade and lobbies decision-makers to create more efficient conditions for trade.