After almost 17 months of bloody attacks, both the Israelis and the Palestinians are left to reflect on painful failures. Israel's defense policy has not brought about a reduction in the violence. The opposite is true. None of the military tactics employed have curtailed the terror attacks: not the curfews, the house demolitions nor the uprooting of plantations; not the assassinations nor the incursions into Palestinian controlled areas; not the road-blocks nor the humiliations, nor the siege of Arafat's bureau in Ramallah.

Since the start of the current Intifada, the lexicon of the Israeli military has seen a new phrase come into use: the target bank, from which the security cabinet selects its next target. But the acid test of reality has proved that this bank does not contain any remedy for the wave of terror attacks.

On the Palestinian side, the situation looks even more dire. Until very recently, the Palestinian leadership spoke of finding ways to end the cycle of violence and to renew talks between the sides. Now, the Palestinians sound desperate. Nevertheless, the last meeting of the Palestinian leadership in Ramallah adopted the now routine decision to express their continued commitment to a cease-fire. They also called for all Palestinian activists to cease their attacks "against Israel and Israelis," from which one can infer that attacks on settlers and soldiers in the West Bank and Gaza are now also off limits.

But every member of the Palestinian leadership knows that these decisions are, in fact, nothing more than lip service. The heads of the Palestinian security apparatus, like all those who are still loyal to Arafat, have no motivation to try and impose a halt in the terror attacks instigated by hundreds of young Palestinians in the West Bank and Gaza. "Violence breeds violence," proclaimed Jibril Rajoub, the head of preventative security in the West Bank, last week. He was speaking about the three weeks of relative quiet that had just ended. As long as Israel continues with its punitive policy and its assassinations, it paralyzes itself.

Compared to Israel, the PA is a very small and weak body, which rules over a poverty-stricken population and does not have a tradition of ordered rule. Its ability to act against opponents from Hamas and the Islamic Jihad is comparable to various Israeli governments' ability to dismantle the settlements. And while the PA becomes increasingly ineffectual, the use of terror increases. Once, while he was ensconced in Beirut, Arafat was asked why Palestinian terrorists plant bombs in Israeli marketplaces. "Because we don't have Phantom jets, like Israel used to bomb our refugees in Lebanon," he replied.

The pressure being put on Arafat is the sort that usually makes him respond with some bizarre comments. Last week, he explained at length to Egyptian journalist Mohammed Mustafa how Israeli agents were behind the Karine A weapons ship, and how Palestinian collaborators with Israel were responsible for the murder of minister Rehavam Ze'evi. It may well be that Arafat knows how inane that is. But he may believe that it is preferable to utter the occasional inanity, rather than been seen to be allying himself with the Iranians in smuggling weapons, or better than being seen as someone who has no control over his underlings.

The current deterioration is causing many Palestinians to revert to the language of the 1960s, such as "the Zionist entity," instead of the Israeli government. Farouk Kaddoumi, the PLO's foreign minister, is now celebrating a victory. Around the time of the Madrid Conference, he said that there was no point starting a peace process with Israel. Now, he is proposing that the Palestinian leadership reconsider its recognition of the State of Israel. Arafat and his supporters have not yet reached that point. They still hope that a further deterioration will force the Americans to side with those calling for an international peace-keeping force to be stationed in Israel. Members of the Palestinian leadership is now saying that their own "bank" - of suggestions as to how to end the violence and renew talks with the Israeli government - is empty.