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Source: http://www.pmo.gov.il/PMOEng/Communication/Spokesman/2009/07/spokestart050709.htm
Netanyahu Insists Two States Requires Defensible Borders for Israel and Full Palestinian Demilitarization
[Prime Minister's Office] Prime Minister Netanyahu told the Israeli Cabinet Sunday: "We have brought a national agreement on the idea of 'two states for two peoples' and the outlines of the agreement are - first of all - that the Palestinians will need to recognize the State of Israel as the state of the Jewish People. This says that the problem of the refugees will be resolved outside the State of Israel and that Israel needs - and will receive - defensible borders, and includes the full demilitarization of the Palestinian territory."