'This Week' Transcript: Tax Deal

This week, direct peace talks between Israeli and Palestinian negotiators collapsed, and the United States has given up trying to get Israel to freeze settlements as a condition for talks, a disappointing turn of events for President Obama, who from the first days of his administration was determined to get both sides directly talking to each other.

(BEGIN VIDEO CLIP)

OBAMA: America must play its role in ushering in a new era of peace. To the Muslim world, we seek a new way forward.

MILLER: He came in as a potentially transformative president, louder, harder and faster on this issue than any of his predecessors.

AMANPOUR (voice-over): And on his second day in office, President Obama appointed a special envoy to the region, George Mitchell.

MILLER: He, in effect, had no strategy. It was an effort to repair American credibility with one audience, the Arabs and the Muslims, but it -- it seemed to pay very little attention to the political realities in Israel.

AMANPOUR: Talks between the Israelis and the Palestinians had stalled for two years. And to move them along, President Obama insisted that Israel stop building Jewish settlements where the Palestinians planned to build their state.

H. CLINTON: He wants to see a stop to settlements, not some settlements, not outposts, not natural growth exceptions.

AMANPOUR: Israeli Prime Minister Benjamin Netanyahu eventually agreed to a 10-month freeze on new construction. And at the end of August, the White House announced the resumption of long-stalled face-to-face negotiations between the Israelis and the Palestinians.

OBAMA: This moment of opportunity may not soon come again. They cannot afford to let it slip away.

AMANPOUR: But it did. At the end of September, the settlement freeze ended and the U.S. could not persuade Israel to extend it. Direct talks broke down, and now the process is back to where it started.

H. CLINTON: It is no secret that the parties have a long way to go and that they have not yet made the difficult decisions that peace requires.

(END VIDEO CLIP)

AMANPOUR: We're going to explore now what those difficult decisions are. It's a rare opportunity -- exceedingly rare -- to have top Palestinian and Israeli officials together here for an interview.

So joining me now, Palestinian Prime Minister Salam Fayyad and Israeli opposition leader, former Foreign Minister Tzipi Livni. They are in Washington to address the 2010 Saban Forum hosted by the Brookings Institution.

Welcome to both of you. Thank you for being here.

LIVNI: Thank you.

FAYYAD: Thank you.

AMANPOUR: Let me ask you first, Ms. Livni, as a representative of Israel, how can Israel do this, basically humiliate the United States, its biggest backer, its biggest donor of all sorts of aid, and just say no to a request for another 90-day freeze, in order to get this peace process moving?

LIVNI: I believe that it was the wrong answer. I believe that the relations between Israel and the United States are existential to the future of the state of Israel. But more than that, I believe that peace treaty between Israel and the Palestinians is an Israeli interest; it's not a favor to President Obama.

And Israel need to make these kind of decisions in order to live in peace, so, basically, peace treaty between Israel and the Palestinians is an American interest, but it is also an Israeli interest.

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