THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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ADEL DARWISH, MIDDLE EAST ANALYST: I think it was very unwise for Prime Minister Barak to actually go ahead with this ultimatum, he knows very well that Arafat cannot really stop the violence in the streets.

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BOBBIE BATTISTA, HOST: Twelve days of violence, nearly 90 people dead, and an impending deadline. The Mideast threatens to explode.

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NACHMAN SHAI, ISRAELI GOV'T SPOKESMAN: ... attacks by Palestinians, and in many cases, by live fire, by live ammunition. What would you like us to do, to wait and see, to sit like ducks and to let our people die?

NABIL SHAATH, PALESTINIAN NEGOTIATOR: There has been a message, is we want international legality to interfere to protect the Palestinian people from the Israeli war.

(END VIDEO CLIP)

BATTISTA: Can diplomacy settle a 52-year-old conflict, or is it destined to play itself out on the battlefield?

Good afternoon, everyone, and welcome to TALKBACK LIVE.

It is a bit after sundown in the Middle East. The Israeli deadline has more or less passed. And CNN correspondent Jerrold Kessel has just spoken with former Israeli Prime Minister Shimon Peres, as well as chief Palestinian negotiator Saeb Erakat. Their stated positions are not unexpected. Let's listen.

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SHIMON PERES, FORMER ISRAELI PRIME MINISTER: Mr. Arafat should order his people and troops to stop violence. I am sure that Israel did not take and will not take any initiative to increase or continue the violence. We are ready to stop in a minute's time. Secondly, we're aware about the efforts of President Clinton to call in a conference and save the situation in the last moment. We shall participate in every effort to save peace.

SAEB ERAKAT, CHIEF PALESTINIAN NEGOTIATOR: Mr. Peres doesn't know the facts out there, that there are more than 2,500 Palestinians in hospitals wounded, and 100 dead, and the shooting is still going on by the Israelis. So the question, Jerrold, is that there is a party that's shooting, that's the Israelis, and a party that's dying, that's the Palestinians. We urge the international community to interfere immediately and put an end to this violence.

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BATTISTA: All right, Jerrold, to the latest developments now, there is an Israeli cabinet meeting scheduled for about 30 minutes from now. What can we expect, if anything, out of that?

JERROLD KESSEL, CNN CORRESPONDENT: Bobbie, you know, when someone talks of an ultimatum, and certainly I think Mr. Barak's statement from Saturday night could be conceived an ultimatum, there are three things in mind: one, there's a demand, the demand was that the Palestinians quell the violence; that there's a deadline, he made it clear there is a deadline, not a precise deadline, let's say, of 48 hours, but certainly within the two days or so; and that there would be consequences. Now, Mr. Barak, from what we understand, is of the opinion that Yasser Arafat has not done anything to quell the violence, which he should have done.

And therefore, I think -- and this is what we are hearing from people who are in the know with the -- top Israeli political circles -- that the consequences Mr. Barak will address with his -- the members of his cabinet what consequences should be drawn from the fact that the deadline has passed without that demand being met. And it could come on a number of fronts, it could come simply in Mr. Barak fulfilling the two aspects of his demand, of his ultimatum: one, that from now on if he takes that position, Israel will no longer consider Yasser Arafat a peace partner, or that Israel and the Palestinians are into a peace relationship, and there is a lot of consequences that could be drawn from that.

And on the ground, it will mean that Israel will try to, as Mr. Barak said, undertake forceful action to ensure that there is no more violence, or to quell that violence of its own accord, and that could have dramatic consequences in terms of how Israel raise itself against the Palestinian in the West Bank and Gaza. So it could be very ominous, indeed -- will Mr. Barak take these kind of positions, will the cabinet go along with him, and the cabinet has quite a dovish compliment in it, that's another matter.

But I think we can draw one conclusion from the fact of the mood of Mr. Barak, in any event. Kofi Annan, the U.N. secretary general, is here already, he's been meeting with Israel's acting foreign minister, Shlomo Ben-Ami, but he wanted to meet with Ehud Barak this evening, and from what we understood, no such meeting has been arranged for today, it will only take place tomorrow. Mr. Annan, the secretary general, will be going down to Gaza to meet with Yasser Arafat. So, quite an ominous looking development and introduction to this very critical Israeli cabinet meeting -- emergency meeting here in Jerusalem this evening -- Bobbie.

BATTISTA: Meanwhile, what's going on in the trouble spots, Jerrold, like Ramallah, or the West Bank? Is there fighting, or is it quiet now?

KESSEL: We've heard that it's relatively quiet now and that has been a patent, that as nightfall comes in, by and large, the fighting does die down. Today, contrary to what the Israelis are saying, really it has been -- apart from Ramallah, where there was a very fierce clash -- it has been among the quietest of the 12 -- 11 or 12 days of this confrontation, that is in -- on the streets of those flash points between Palestinian demonstrators and the Israeli army.

But there have been two ominous other battlefields, if you like, evolving, one on the level -- and basically between civilians of the two sides. There have been at least two people killed on the West Bank, found murdered, one Israeli and one Palestinian; a Jewish settler found murdered, believed by the settlers to be murdered by the Palestinians. The Palestinians -- there is at least one body of a man -- a 38-year-old man who was found, the Palestinians say he was killed by settlers' torture. The Israelis say it was only a road accident, and that's the Israeli army's version.

And anyway, there is that prospect of the -- or ominous prospect of settlers and Palestinian civilians taking each other on, on the West Bank. There is also -- in Israel proper there have been some horrendous clashes between Israeli civilians -- Jewish civilians and Israeli Arab civilians. Two Israeli-Arabs were shot dead in those clashes in Nazareth last night, in Galilee, and there were more clashes today. The police trying to get in the middle, and actually a good deal of disturbances on both sides. So that, a worrying development, too, in terms of the unfolding of violence into different arenas -- Bobbie.

BATTISTA: Could be a long night. Jerrold Kessel, thank you very much for joining us.

With us now is CNN White House correspondent Major Garrett. Major, what's the strategy from there at this hour?

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Well, Bobbie, the president of the United States has returned to the White House, he spent the evening in Chappaqua, New York, he came back to the White House, accompanied by daughter Chelsea Clinton. The president declined to answer any of the reporters' questions shouted at him as he entered the White House, trying to assessment -- tried to get his assessment, rather, of the deteriorating situation in the Middle East.

White House officials tell CNN that the president will spend the better part of the afternoon, and a good part of the evening trying to get in touch with leaders throughout the Middle East. Among those on his call list likely, Palestinian leader Yasser Arafat, Israeli Prime Minister Ehud Barak, and quite possibly, Egyptian President Hosni Mubarak.

Behind the scenes, there are two things the U.S. government are looking for, and developments unfold this evening in the Middle East: one, as the Israeli parliament meets, the administration hopes that the Israeli government will not declare a formal end to the peace process, which Jerrold Kessel just alluded to; secondarily, they know that U.N. Secretary-General Kofi Annan will meet with Mr. Arafat. They're hopeful that after that meeting Mr. Arafat will issue some statement that at least moves in the direction toward him calling for a sustation (ph) of the Palestinian-led violence in the region.

Administration officials tell CNN that if those two things happen, they believe that would add a better context and certainly a better atmosphere to possibly get the two sides together and possibly call together even a summit later on this week that would involve the president himself traveling to Sharm el-Sheikh, Egypt, to meet with Mr. Barak, Mr. Arafat and Mr. Mubarak -- Bobbie.

BATTISTA: All right, Major Garrett, thank you for joining us today as well and for that update.

With us now are Raghida Dergham, the senior correspondent for the London-based Middle Eastern newspaper "Al-Hayat." Also with us, former U.S. Congressman Wayne Owens, president of the Center For Middle East Peace and Economic Cooperation. Mr. Owens has just returned from Israel.

And let me start with you. How fluid do you think this deadline is, and what would you expect from the Israeli cabinet in the next hour or so?

WAYNE OWENS, CENTER FOR MIDDLE EAST PEACE: Well, I think that it is somewhat fluid, Bobbie.

I think that Barak, even as he tries to decide whether in fact violence has decreased and Arafat has made an attempt to meet the ultimatum -- even though he would never announce that he made that attempt -- that at the same time he will be negotiating to see whether in fact he can form a new national unity government; the same time still hoping and praying that he can figure out how to stall long enough on those two areas so that he can assist with what President Clinton is trying to bring about: a summit where they can get together and hopefully not only stop the violence, but complete the peace process. That's what's at stake here, that's what a very real reality, I think.

BATTISTA: Raghida, Israel says, and the U.S. to some extent, that Yasser Arafat has the power to stop the violence. Does he have that sort of complete control over Palestinians?

RAGHIDA DERGHAM, "AL-HAYAT" NEWSPAPER: Yasser Arafat is the leader of the Palestinian people, but he does not have the full and total control now, particularly after the escalation, after the rhetoric and ultimatum, and after 100 Palestinians have been killed, 2,000 in hospitals. So if he had, had the authority and the power to control, he has it less today. However, the starting point is really the investigation that Mr. Arafat needs. There is a resolution that the Security Council adopted two days ago, which called for an investigation, a mechanism by which one would investigate what has taken place for the last few days, what was the reason, and to make sure that there is no reoccurrence of these horrible things that took place in the last 10, 11 days.

Mr. Barak has rejected or at least, let me correct myself, has not accepted such a mechanism yet, but I have a feel that Mr. Annan, that Kofi -- Mr. Kofi Annan, the secretary-general of the United Nations, in his attempt to bring closer the positions will need the investigation, some sort of mechanism for the investigation along with that statement from Mr. Arafat to ease the...

BATTISTA: Have Palestinians lost -- are they losing their faith in Yasser Arafat here?

Some of them are losing faith and some are very clearly against Mr. Arafat. Some have been in competition with him and against his adoption of the peace process and the process of negotiation altogether. So in effect, this battle that Mr. Barak is waging against Mr. Arafat is really weakening (UNINTELLIGIBLE) weakening Arafat, weakening those who support the peace process.

He -- Mr. Barak, unfortunately, is falling right into the trap that has been set up for him by the extremists starting with Mr. Sharon by his provocative visit to Haram Sharif, and thereafter, I think he has been unable to distinguish between what is needed for Israel to take a real good leadership position and between making sure that he doesn't fall into the trap of the extremists dragging him to escalation.

BATTISTA: Before I go to break, let me ask Wayne, who do you think has the power to stop the violence?

OWENS: Well, I think Yasser Arafat has enormous impact on it. I think, as the reporter just said, it's decreasingly possible for him. He can't turn it off and on. He's used it obviously to his advantage since Camp David, in particular in the 11 days since the provocative action of Ariel Sharon. That has been of enormous propaganda value to him internationally. But I think he has clearly the capability of brining it to a close.

I gather, as Jerrold just reported, there has been a decrease in violence contrary to what he indicated Prime Minister Barak's expressed sense was, that there has been a decrease.

You have the Nazareths, you have the Ramallahs, but by and large, there's been a decrease.

Listen, Yasser Arafat could never say, I'm giving into the demands and the ultimatum of the prime minister, and I am going to stop the violence. But you will see and I think you're starting to see that in essence he does want the peace process to go forward. And you'll see a gradual diminishment. But he can't just turn it off; he has to head it off.

BATTISTA: I've got to take a break here and we'll continue with our discussion right after this.

(COMMERCIAL BREAK)

BATTISTA: Welcome back. Let me -- let me read this e-mail quickly here from Nader (ph). He says: "I believe the reason for the violence is merely because Barak is attempting to make peace within his own government that had abandoned him for going along with the peace process."

Wayne, let me ask you about that situation. There is some thought, too, that the person who precipitated this latest round of violence, Ariel Sharon, when he visited a holy site, may have been setting up Barak.

OWENS: Well, he certainly played into the hands of the Palestinian extremists and he should have known what he was doing. I can't believe he foresaw the terrible circumstance, but he saw at least there would be a provocation.

He --the extremists on both sides, Bobbie, are more and more coming into control, and there are enemies of the Oslo peace process on both sides.

Barak, who's the most decorated soldier in Israel's history, has always gone for broke. That's why he was such a successful soldier. That's also why he's such a good prime minister in terms of seeking the peace process.

You had a remarkable interview an hour ago with Shimon Peres, in which he admitted that Barak had gone -- has been more brave then he, Shimon Peres, even was in the things that he has offered. That has cost him dramatically in terms of his domestic political support.

The extremists on the Palestinian side that are keeping the rioting and pushing the rioting, these are the enemies of peace on that side. The enemies are in the ascendancy.

What's got to happen right now is the Americans have to take a strong stand. The Palestinians can stop the violence, but it's now time for the Americans to play the same roll they played in Camp David one.

BATTISTA: I have a question from Andrew in the audience for Raghida basically.

ANDREW: Yes. It seems that Arafat's influence seems to be diminishing. And is there another faction in the Palestinian organization that would like to see Arafat out and they take a more aggressive stance with the Israelis?

DERGHAM: Yes, of course. There are several factions (UNINTELLIGIBLE) or out there, in fact, that would like to take control and topple the peace process. That is why Mr. Arafat has been attacked by several quarters, Palestinian and Arab quarters, who have taken him to task for continuing to negotiate. And so therefore, in his battle right now with the extremists, he is not being helped by Mr. Barak, who is issuing ultimatums and saying that you are not my partner in peace. In fact, what Mr. Owens said a little earlier about Peres, Shimon Peres, the former prime minister, who lost the elections, I agree that he lost the elections by the decision of the Israeli public. But the fact of the matter is that what failed him and what cost him the elections, when he went hawkish on the Israeli public and the (UNINTELLIGIBLE) massacre four years ago. It is then when the Israeli public turned to him and said, we voted you in as a peacemaker and here you turned hawkish on us.

I'm afraid that Mr. Barak will repeat the same mistake, and I would then predict his downfall politically, not his victory. The fact of the matter is that they need each other: Mr. Barak and Mr. Arafat need each other in order for this peace process to succeed, and otherwise, they both will go down together if it fails.

BATTISTA: We...

OWENS: Bobbie, I certainly agree...

BATTISTA: ... Before you respond to that -- Wayne, hold on just a second because I need to -- we're getting a lot of phone calls here understandably because we do not have a Jew or an Israeli involved in this discussion.

You must remember that it is Yom Kippur, the holiday today, which made it virtually impossible for us to get someone. So Wayne is sort of stepping into that position. We're doing our best to keep it balanced.

Wayne, go ahead.

OWENS: We like to consider ourselves honest brokers. We are neither Jewish nor Muslim. I'm, in fact, a Mormon from Salt Lake City. We are trying to be honest brokers. We have relationships on all sides. We try to help everybody and try to maintain a neutral posture.

The reason that Shimon Peres lost the election in '96, in my view, was the bombings, the terrorism that was going on, which hurt enormously his credibility and led to his defeat in may of '96.

But the point I was trying to make is that Barak has even gone beyond where Peres went in trying to offer concessions at Camp David. He did offer enormous concessions, and it has resulted in his lost domestic -- a loss of his domestic political power. That's happened to Yasser Arafat, as Raghida just commented.

DERGHAM: Yes, he has. If I may just add one thing, Mr. Barak has taken several bold steps, no doubt about that, but he has failed to take the distance.

BATTISTA: I have to take another break. We'll come back. Stephanie's on the phone from Ohio with a comment. Back in just a moment.

(COMMERCIAL BREAK) BATTISTA: A couple of faxes. Clausman faxes us. "Isn't it now more than obvious that the Arab nations other than Egypt will never allow Israel peace? When Israel gives an inch, the Arabs want a block, then a mile, plus a capital?"

And Fish e-mails us: "How does the Israeli government justify killing over 90 Palestinians with the use of gunfire, tanks and fighter jets while they have nothing more than sticks and stones to fight back with?"

Let me take a phone call from Stephanie in Ohio. Stephanie, go ahead.

STEPHANIE: Yes, I would like to address just that issue. The Palestinian people are made out to be these poor people that are just throwing stones and sticks against the mighty Israeli army, and this is not true. The Palestinians are armed. All the time we see on the news pictures of them with guns. They are shooting back at the Israeli army. They are shooting Israeli citizens.

For example, yesterday, a rabbi was murdered by Palestinians because he was shot.

Also, people are claiming that the Israelis are using excessive force against the rock throwers. Excuse me, rocks kill. Just two days ago, an Israeli was on the coastal highway, not in the occupied territories, not in Gaza. He was driving from Tel Aviv to Haifa, and Israeli Arabs inside Israel took a huge rock and smashed it down on his car killing him.

BATTISTA: Stephanie, thanks very much for your comments. I want to bring a guest in right now who just got back from the Middle East and we'll ask her about what she saw. Marie Colvin is with us. She's a correspondent for "The Sunday Times" of London and recipient of the International Women's Media Foundation's Courage in Journalism Award.

For the past 15 years, she has reported on nearly every violent conflict in this world.

And congratulations, first of all, to you, Marie, for the award.

MARIE COLVIN, "SUNDAY TIMES OF LONDON": Thank you, Bobbie.

BATTISTA: You just got back. You were there last week. What did you see?

COLVIN: Well, it's an escalating conflict, certainly at the beginning of the week. And I forgot the name of the lady we just heard from in Ohio, but I think there is a misperception if what's seen here is that these are two armed forces shooting back at each other. That's just not what I saw.

Mostly what you have are -- it's becoming sort of ritual, began with the visit of Ariel Sharon, a very provocative visit, which both sides agree, to the place, Haram as-Sharif, this noble sanctuary sacred to the -- both Muslims and Jews. That's you have -- what you're having now is deaths every day, and it's become a ritual in that after these -- you're having even kids killed. And I don't think -- I think, if it's possible to step away from the political rights and wrongs of this, in general, what I saw were youths, teenagers throwing stones at Israeli posts on the West Bank, in Gaza, an escalation of return fire, starting with tear gas, steel bullets covered with rubber, and then live fire.

And you know, this is such an emotive issue. I think if people could just think -- well, you had a very violent confrontation, for example, In Seattle against globalization. What if Americans didn't have to turn gunfire on those protesters to stop it? What if Milosevic had turned guns on protesters in Belgrade?

I think there's no doubt that there is Palestinian violence. That's not just about Sharon's visit. That's about frustration and anger, particularly among youths. But there should be a way to stop that violence without live ammunition being fired at kids: 50 percent of the 90 people killed are under 15, and you know, there's something wrong with those statistics.

BATTISTA: Let me take a question for you from Brendan (ph) in the audience.

COLVIN: Sure.

BRENDAN: I would just like your perception, the violence in the Palestinian, is it controlled actions to get an international response or is just spontaneous reaction?

COLVIN: Well, you know, that question is being asked over and over. Yasser Arafat does not have a remote control that he presses and everybody stops. It doesn't work like that. Yet if Yasser Arafat gave an order -- he does have opposition among the Palestinian people -- but he also his historical authority. If he gave an order to stop immediately, nobody goes out on the streets, he would lose that authority.

It's he also -- they wouldn't obey him. This is -- a lot of the violence that I saw, it comes from -- the Sharon visit is just a spark. It comes from the last several years.

You have to realize we're at an interim period. You know, peace has been agreed and the details are being worked out. We're at an interim period.

The Israelis can have the interim period go on as long -- as long, you know, as it need by. It doesn't affect their daily lives.

For Palestinians, the interim period every day affects their daily lives. And that's where the frustration is coming from. They're bottled up in cities. Youth has no job. That -- you know, that has spilled over. And they're seeing -- a lot of the -- when I talk about a ritual, a 12 -- when I was there, for example, a 13-year- old and a 14-year-old were killed. And there were funerals the next day. And kids -- mostly kids -- I mean, when I say kids, it's anything from 13 to 20 -- run to the nearest place they can confront the Israelis and start throwing stones. That is spontaneous.

OWENS: Bobbie.

COLVIN: And, in fact, you've seen -- you've seen a lessening in the violence. Because certainly at the beginning, you did see Arafat's people shooting back. That has stopped about a week ago. Right now, you just have kids with stones.

BATTISTA: And, Wayne, quickly. You wanted to jump in.

OWENS: Well, you have to fall back and look at not only who can stop the violence, but who starts it. The violence comes from Palestinian students and others advancing on Israeli security places, and getting -- and trying to breach Israeli borders.

The rock-throwing, molotovs -- and yes, there are some AK-47s. There are not a lot. But there are some there. Those are the people who are actually invoking the response by the Israelis. And, yes, the Israelis have used some excessive force. But, in essence, the Israelis would not be shooting the Palestinians if the Palestinians weren't, in essence, trying to breach Israeli security.

(CROSSTALK)

BATTISTA: I have to -- Raghida, hold that thought. I will come right back to you. I'm pushing the break here. When we come back, we will hear what Raghida has to say. Also, how far can this conflict spread?

We'll talk about that right after the news.

(COMMERCIAL BREAK)

BATTISTA: The Cabinet of the United Arab Emirates decreed today that, starting this month, all public-sector employees will have a day's salary taken from their monthly paychecks, with the funds going to the families of Palestinians killed by Israeli forces.

Welcome back.

Raghida, I am sorry I interrupted you before the break. Go ahead.

DERGHAM: Bobbie, I wanted to make a comment on what Mr. Owens said.

The fact of the matter is that this is an army, an army that belongs to a country shooting at civilians that are under occupation. The Geneva Conventions prohibit that an army shoots at those under occupation. It's supposed to protect civilians in the times of wars. This is absolutely against the law. And it also a violation of the human rights of the Palestinian people. Those who are Arab -- the Arabs in Israel, about 11 or 12 of them have died already. This is a new dimension. These are Israeli citizens. And they are not meeting the protection needed. Now, as to the Rabbi that the caller referred to, he is one of the settlers. Again, settlements are against the law. There are not supposed to be settlers in these occupied territories. And this is another story.

But let's remember international laws and what the U.N. resolutions say and go back to the fact that this is a violence that is not between -- it's not in a civil war. This is an uprising. An uprisings are not the stuff made on the drawing table. This is an expression of frustration. This is a readiness to end the occupation.

And it is best for Israel if it sheds that identity of an occupier and arrive at peace with the Palestinians -- and they were really close -- conclude a settlement, and live by each other, rather than spread this out of proportion. And then maybe the Israelis would win a war with the neighboring countries, but they will always lose the war on the inside.

They are too intermingled with the Palestinians. They are right there together. And this war is not winnable.

OWENS: Bobbie, there is no question that, under international law, troops holding security positions are allowed to defend their own lives and their security positions. If those security positions are to be given over to the Palestinians, it must not be as a result of mob violence, it must be as a result of negotiations.

We can't lose our perspective here. The army is not firing on unarmed civilians unprovoked. They are firing to protect themselves and their positions. And that's permissible under the Geneva Convention.

BATTISTA: I have an e-mail from Jack in Indiana, who says: "Israel wants security and the Palestinians want justice. And they cannot have both."

Marie, it's sort of -- it sort of leads to the question that, even if peace is eventually reached in the Middle East, do you think these two peoples will ever be able to coexist agreeably together?

COLVIN: Well, I think, actually, both sides -- I mean, you know, if you look at what's going on now, this may seem impossible. But both sides, certainly both leaderships, leaving aside the opposition within, you know, against Arafat and against Barak, both sides have accepted that the way to a solution is political, not military. You know, they have been at odds one way or the other for decades.

The peace process has gone too far. Whether they like it or not, they're both stuck in it, and I think that's accepted by both the Israeli leadership and certainly by the Palestinian leadership.

But living together is, you know -- living together needs a quality. They're going to have to live side by side. As Raghida just said, they're too intermingled. You have Palestinians -- Israeli Palestinians living inside Israel. They're going to be side-by-side.

You know, in fact, on that -- in Jerusalem, you have -- for years, have had cooperation on an economic level. They can get along. But there has to be a settlement in which both sides feel that they have equality.

Barak has made very bold steps, and you know, as it is true that he's gone further than any Israeli leadership, and I think certainly Palestinians have to realize the fundamental depth of Israeli fears. But you know, at the same side, going further than any Israeli leader doesn't mean that he went far enough to reach some kind of minimum level that would be acceptable to Palestinians.

Palestinians are asking for self-determination, which, you know, certainly in the last decade we've seen it accepted. A lot of people have sought that, have fought for that, and we've supported them.

Given self-determination and security for the Israelis, I think they certainly could live together.

BATTISTA: I have to take another break. When we come back, I have a woman on the phone who is Jewish. Her husband is Arab. We'll see how they've worked it out, right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANDREW: Hello. My name is Andrew from Virginia. I think this is entirely Israel's fault. They chose Israeli settlement over a peace settlement, and it's time for them to really sign a peace treaty.

(END VIDEO CLIP)

BATTISTA: Let me take that phone call from Stacy (ph) in New Jersey. Stacy, go ahead.

STACY: Hi. I'd like to think of myself and my husband as civilized, evolved people, and as a Jewish woman who holds American and Israeli citizenship, and my husband, who is an Isreali Arab, who holds Israeli and American citizenship, it's very difficult at times to watch the news and then sit next to each other, and you know, view our relationship as we do. But we put ego and emotions aside, and that is clearly what needs to be done on both sides.

And it's very easy for me to say that as an individual. I don't run a country. I'm not a political person.

But that's absolutely what has to be done. Ego and emotions must be put aside. We have to put human lives first.

BATTISTA: And Wayne, you mentioned that earlier in the show. You said this is a very emotive issue, and that is an element that does have to be diluted in order to make progress. OWENS: Well, you know, Bobbie, the discussion we had just before the break and then this woman's point on the phone shows what I think is absolutely true. Those two people have so much in common and they get along very, very well when you can remove the irritant of the political differences or religious differences between them.

We -- economic cooperation is the second part of our name, and we work at trying to involve the different -- the Israelis and the Arabs in economic interaction. And I'm telling you, when they work together, when it's economic-based, when they're equal opportunities there, there is enormous activity together, and a very, very good, warm feeling.

If you can get a peace treaty, a political decision on the table, and then give them 10 to 15 years, if you can keep them from fighting for 10 to 15 years, and they develop that economic interaction, the investment in each other's economies and you build the economy of the Palestinians -- you know, they get back on with a 20th as much money per capita as the Israelis -- you've got to solve those kinds of poverty issues. But that economic interaction, those people can live together. They have so much more in common than they have to separate them.

BATTISTA: A question from the audience here -- Andrew.

ANDREW: Yes, I have a question: If somehow the Palestinians were to get a homeland in Jerusalem, what does -- what is there to stop them from saying, you know what, now we want to take over all of Israel? When is this going to stop?

BATTISTA: Raghida?

DERGHAM: First will all, the Palestinians are not asking for the whole of Jerusalem to be their capital. The negotiations that have stopped at Camp David and the continued ones thereafter actually had accomplished quite a bit, a lot of ground was covered. The Palestinians and the Israelis were very close to a settlement in which the Palestinians will get back some of the occupied territories, not all of them, but something close to 95 percent from the occupied West Bank, and that the Israelis, of course, were making some conditions as to the whole package, what it's going to entail. Some were acceptable, some were not, referring to the refugees.

But the bulk of the problem was in Jerusalem, and the Palestinians have been saying -- we were talking about withdrawal to the 1967 borders, according to the Resolution 242. Therefore, East Jerusalem falls under this equation. And they're say, we're accepting a division, Jerusalem divided: West Jerusalem as a capital of Israel and East Jerusalem as a capital of Palestine. (UNINTELLIGIBLE) for the Israelis, Al Quds for the Arab -- for the Palestinian state.

The point is that should there have been a settlement -- and I hope there will be one -- they could sign agreements that would guarantee their co-existence together without one stepping on the toes of the other. And mind you, the Palestinians are not going to be in a position to conquer the Israeli might. They will have to live with the agreements reached.

BATTISTA: We'll be back in just a moment.

(COMMERCIAL BREAK)

BATTISTA: Jay, on the Internet, that comment there on the Internet expresses a lot of the feeling that I'm picking up from the audience. There seems to be a lot of uneasiness among some of the Americans sitting here today by getting involved in this conflict, and many of them see it as this being just another international conflict that the U.S. is sticking its nose into.

Why should we care? Why should we be involved in this? Wayne?

OWENS: We have a dramatic, very important American interest in the Middle East. We went to war nine years ago to protect the free flow of oil. But it shouldn't be considered just an economic interest. We have a deep investment in the humanity of the Middle East.

We're very closely tied to the Middle East, to Israel and to the region.

I think it's time now that President Clinton -- and I know he's been working on it for a couple of days -- make a dramatic gesture. I hope and believe that within the next few hours maybe you will see the president deciding to go to the region to try to flip the demonstrations and the violence and this hatred into a positive reaction by trying to complete what they started and almost concluded two months ago at Camp David.

The bridging proposals of the Americans are on the -- not on the table, but they're ready to go onto the table whereby the compromises are suggested between the two positions of the parties.

You know, many people of knowledge both said that we were 85, 90 percent, 90 percent of the way at Camp David, and because of the question of who shall have absolute sovereignty on the Haram as- Sharif, the Temple Mount, it's all broken apart, and you can see where it could became a very -- a very terrible widespread conflagration. It's time for the Americans to get more heavily involved. It's time for the parties now to decide to get it done.

BATTISTA: By the way, that Israeli cabinet meeting has now been delayed until about 4:30 Eastern Time. So we'll have to wait and see what the latest developments are from there.

We'll be back in just a moment.

(COMMERCIAL BREAK)

BATTISTA: We are completely out of time, as we usually are. Wayne Owens, thank you very much for your insight on this today, appreciate -- appreciate it. Raghida Dergham, thank you very much for joining us as well.

DERGHAM: Thank you.

BATTISTA: And Marie Colvin, again, congratulations and thank you for joining us.

We're out of time. We'll see you again tomorrow at 3:00 for more TALKBACK LIVE. STREET SWEEP is next.