"Is the option of a Jewish democracy with apartheid acceptable? In my view, it is not," he said.

Ignored by the media, but very clear on the TV and radio recordings of his statements, was a statement that the Palestinians should not be expected to be content living "in a bantustan", separated from Israel, and at the same time separated by us, "for security reasons", from Egypt and Jordan.
 

Susi Mordechay adds:

The bombshell that Ayalon's thrown and which's been rightfully picked up by the media and the right -- they repeated it on Reshet B all day yesterday and today devoted a long discussion with Mitza and Israel Har'el -- was in using the "A" word openly and as something taken for granted.  He used "Apartheid" and "Bantustan" as obviously -- and w no question about it -- describing the current situation and one of the proposed "peace options".
The J Post reference to it (below) is not accurate; here's my free translation of one of the relevant quotes as it appeared in Yediot and as I've heard it:
" In the past we used to say 'first we'll achieve security and then we'll have a real examination where we'll ask ourselves: who are we? what is a Jewish Deocracy -- how much democratic, how much Jewish?' "  ... " Is the Jewish option with Apartheid acceptable? In my mind, no.  That's a dillema we've always wanted to delay.  The reality of today doesn't allow us anymore to delay the dilemma because a reality is being formed without us having examined it. The decisions are being made."

PALESTINIANS NOW BELIEVE THEY GAIN THROUGH VIOLENCE
 
                  By Ora Coren Ha'aretz Correspondent

[Ha'aretz 5 December 2000] - Israel's policy has led the Palestinians to believe that they can gain a state through violence, former Shin Bet chief Ami Ayalon said yesterday at an annual meeting of the Finance Ministry's budget division.

Ayalon stated that the Palestinians' decision to take the Oslo path in 1993 was based on the assumption that a Palestinian state could be achieved only through negotiations, and not through violence.

"Now some Palestinians think that there is another alternative, and that what we are offering is not honorable," said Ayalon. "As they see it, we gave only when a gun was at our heads - that we halted the process, and returned to it only under threat of violence." He cited the 1996 Western Wall tunnel riots, after which "we ran to Washington and gave them Hebron," as well as the achievements of the Hezbollah in getting terrorists released.

"The Oslo agreement created an ambiguous situation," said Ayalon, adding that the IDF had hoped the political echelons would present a diplomatic worldview that would determine daily reality. However, "we did not get it," he said. As a result, said Ayalon, reality was determined by the army's actions in the field.

Ayalon likened Israel's relationship with the Palestinian Authority to Siamese twins that share common vital systems. He maintained that the debate on separation with the Palestinians should be part of a debate on the identity and essence of Israeli and Jewish democracy. "Is the option of a Jewish democracy with apartheid acceptable? In my view, it is not," he added.

ISRAEL HAWK CONSIDERS RUN AT A WOUNDED DOVE
By Tracy Wilkinson
Los Angeles Times - 5 December:

[...  the article deals with unrelated issues but in the end mentions Ayalon:]

Also on Monday, in public remarks that shocked Israelis, a former head of the Israeli domestic security service blamed government policies for triggering the Palestinian revolt.
Ami Ayalon, retired head of the Shin Bet security service, said Israel is guilty of "apartheid" policies that go against the spirit of Judaism. He suggested that the Palestinians were following a logic in choosing violence, and spoke of the profound "humiliation" that Israel inflicts on Palestinian workers and others who seek to enter Israel.
Such comments are commonly heard from Palestinians and outsiders but rarely from an Israeli who has held senior-level positions in the security establishment.

                AMI AYALON: SEPARATION FROM PALESTINIANS
                   WILL HAVE DAMAGING BOOMERANG EFFECT

By Yossi Greenstein

(Ma'ariv, 5 December, p. 18):  Diplomatic and economic separation from the Palestinians will have a damaging boomerang effect on the state of Israel, said former GSS head Ami Ayalon. "It's like separating two Siamese twins. It will hurt not only them, but us as well."  Ayalon spoke at a conference in memory of workers from the Finance Ministry's budget division who fell during the Yom Kippur War.

"We could decide to be 'Polish' neighbors in the sense that 'Good fences make good neighbors,' and thereby improve our neighborly relations. But this is not the right analogy," said Ayalon. According to him, complete separation will cause the Palestinians to act out against us. The relationship is complex and problematic, he said. If we decide to sever the connection between these two twins, any decision of this sort will affect us inwardly, not just in relation to our connection with them.. The Palestinians will not like this reality and will strike out against us due to a lack of alternatives. The question is not how much force we can apply, but how much pain it will cause us. By the way, the neighbor is always considered as ugly, small and miserable, and we are always tall and beautiful."

Ayalon complained about the freeze in the peace process: "We stopped the process and only returned under [the threat of and actual] violence. During the Western Wall tunnel incident [in 1996], we ran to Washington and gave them Hebron. We release prisoners only when they kill soldiers and when they put a gun to our head. For the parts of the corpse of Itamar Ilya, we released terrorists with blood on their hands. What should the Palestinians and Hizbullah understand from this? When the peace process goes into deep freeze, we come back only under pressure and threats. That is the message to the Palestinians.

They think that they have another alternative, and the compromise we are offering them is not an honorable one.

"The Palestinians learned that Israel only understands force," said Ayalon. "The Palestinians believe that this is the only way they can realize their political goals, the foremost of which is to found a state.  "The things a Palestinian has to endure, simply coming to work in the morning, is a long and continuous nightmare that includes humiliation bordering on despair," added Ayalon.  "But in the last seven years he has discovered that there is another way. They learned this from Hizbullah and from us.

"We have to decide soon what kind of democracy we want here. The present model integrates apartheid and is not commensurate with Judaism. All the decisions necessary to continue the peace process between us and the Palestinian go through those very decisions that must be made in the debate over the essence of Israeli democracy.  Israel must now discuss the essence of its democracy and not postpone it for another period. We will never attain security without an in-depth discussion about this issue."