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Source: http://www.haaretz.com/hasen/spages/1084417.html
The Vatican, the Jews, and the Palestinians
[Ha'aretz] Shlomo Avineri - The Second Vatican Council in the 1960s not only absolved the Jewish people of collective guilt for crucifying Jesus, but recognized the continuing covenant between God and the Jews, paving the way for recognizing the legitimacy of their existence. This transformation, in turn, enabled the Vatican's recognition of the State of Israel. Yet even today, when the idea is raised of matching Israeli recognition of a Palestinian nation state with Palestinian recognition of Israel as the home of the Jewish people, the moderates in the Palestinian Authority respond with unqualified refusal. This is deeply rooted in Palestinians' unwillingness to recognize that in 1948 they made an enormous, tragic mistake in their refusal to accept the UN partition plan and the decision to respond to it with force. Even today they are unable to accept the principle of partition. The Palestinians are willing to talk about two states, but not for two nations, since that would imply recognition of the Jews as a people.