http://blogs.law.harvard.edu/mesh/2009/08/palestinian-recognition-of-the-jewish-state/

In his June 2009 Bar-Ilan University speech, Israeli Prime Minister Binyamin Netanyahu asserted that Palestinian recognition of Israel as a “Jewish state” was one of Israel’s requirements for agreeing to the establishment of a Palestinian state. Both Palestinian leader Mahmoud Abbas and chief Palestinian negotiator Saeb Erekat,immediately rejected the requirement. However, if there is to be a long-lasting peace between Israel and a Palestinian state, Palestinian recognition of Israel as a Jewish state is a necessity.

Palestinians have three official objections to Israel being recognized as a Jewish state, as well as a fourth objection about which they do not speak openly, but which lies at the heart of the Israeli-Palestinian conflict. The three official objections are as follows:

1. It is not the task of the Palestinians to determine the nature of the Israeli state, but that of the Israelis.
2. Palestinian recognition of Israel as a Jewish state would jeopardize the position of the Israeli Arabs, who form 20 percent of the Israeli population.
3. Israel did not demand recognition as a “Jewish state” in its peace treaties with Egypt and Jordan.

The fourth Palestinian objection-which they do not assert openly lest it destroy the chances for a peace treaty with Israel-is that many Palestinians simply do not accept the legitimacy of Jewish nationalism (Zionism). For the Palestinians, and for many other Arabs as well, a Jew is defined by religion, not nationality or ethnicity, and given the position of Jews as dhimmis, or second-class religious subjects in Muslim history, the Palestinians feel that Jews have no right to be rulers, let alone rule over what they consider Muslim territory.

These attitudes, partially latent during the heyday of the Oslo peace process (1993-2000), were reinforced by the Al-Aqsa Intifada, which transformed what had been a conflict between two peoples over the same piece of territory into a religious war between Muslims and Jews, and which greatly strengthened Hamas in the process. Indeed both Hamas and non-Hamas religious leaders stressed that the Palestinians were fighting the Jews, just as Muhammad had fought the Jews who they allied with his enemies as he sought to unite the Arabian Peninsula under the banner of Islam.

What the Palestinians-and other Arabs-fail to understand is that Zionism arose as a national movement among Jews in Europe in the 19th century. Very much influenced by the national unification movements of Germany and Italy (as were the Arab nationalists of the time), as well as by the increasingly precarious position of the Jews in Eastern Europe who were beset by pogroms in Czarist Russia, Zionist thinkers such as Hess, Lilienblum and Herzl asserted that just as the French had France, the Germans had Germany and the Italians had Italy, the Jews deserved a state of their own where they could lead a “normal, national life,” and the ancient Jewish homeland of Israel, then occupied by the Ottoman Empire, was chosen as the site of the future Jewish state. To be sure, the land which the Zionists wanted was already populated by Arabs; however, the Arabs who lived there at the end of the 19th century had not yet developed a national identity (that was come during the British mandate of 1922-48), and at the time primary saw themselves as Muslims or Christians, or as “Southern Syrians” or as Ottoman subjects.

This being the case, one can respond to the Palestinian reasons for not recognizing Israel as a “Jewish state” in the following manner:

1. While the Israelis alone can and should define the nature of their state, as the existential nature of the state is a central factor in the conflict (unlike, for example, the conflicts between France and Germany in the 19th and 20th centuries), then Palestinian recognition of Israel as a Jewish State becomes central to ending the conflict.
2. There are many minorities in the Middle East, and the often negative treatment of these minorities, whether religious (such as the Copts in Egypt and the Shi’a in Saudi Arabia) or national (such as the Kurds in Turkey and the Azeris) is, in fact, linked to the nature of the country in which they live. However these minorities could be protected by treaty arrangements (currently they are not, although Turkey has begun the process of trying to address its Kurds’ aspirations)-so long as they swear allegiance to the state. Indeed, should a Palestinian state which recognizes Israel as a “Jewish state” emerge, that could make it easier for Israeli Arabs to solve their own identity problems, which have become increasingly serious in recent years, as some Israeli Arab leaders have openly backed Hamas, Hezbollah and Syria in their conflicts with Israel. Thus, as part of a peace treaty between a Palestinian state and Israel, the protection of the rights, albeit not the national rights, of the Israeli Arabs could be stipulated.
3. While acknowledgment of Israel as a Jewish state was not a component of Israel’s peace treaties with either Egypt or Jordan, in neither case was Israel involved in the type of existential conflict with these countries as it currently is with the Palestinians-a conflict in which it often appears that the assertion of one people’s national aspirations negates those of the other people. Thus it is necessary for both sides to recognize the legitimacy of the other’s national aspirations. For the Palestinian side, this involves recognizing Israel as a Jewish State.
4. Finally, and perhaps most important of all, it is necessary for the Palestinians to recognize Israel as a Jewish state to replace the image of the Jew as dhimmi, or second class citizen, with the image of the Jew as a member of a national group exercising legitimate national rights, just as the Palestinians themselves do. Once this is done, the chances for a long-lasting peace between Israel and a Palestinian state will be greatly enhanced.