JERUSALEM, Sept. 15 (JTA) — The year 5763 saw the first signs that almost three years of Israeli-Palestinian bloodletting could be coming to an end with the renewal of a fragile peace process. Both Israel and the Palestinians accepted an American-initiated peace plan known as the "road map," and Palestinian Authority Prime Minister Mahmoud Abbas pledged to end Palestinian terrorism. At first, Abbas seemed to be succeeding. On June 29, 2003, Palestinian terrorist groups — including the Islamic fundamentalist groups Hamas and Islamic Jihad — declared a three-month cease-fire. But Abbas failed to take any action to dismantle the terrorist militias, as the road map obliged him to do, terrorist attacks ensued and Israel resumed its policy of targeted killings against terrorist leaders. Seven weeks after it had been declared, the cease-fire collapsed, leaving the region mired in violence and, by year´s end, casting grave doubt on the future of any peace process. In nearly three years of relentless Palestinian terrorism and Israeli response since the Palestinian intifada was launched, more than 850 Israelis and 2,000 Palestinians had died. The Israeli economy had plummeted, and economic life among Palestinians had come to a virtual standstill. Yet despite the terrorism, international pressure and economic hardship, the government of Israeli Prime Minister Ariel Sharon stood firm and made little political concessions to the Palestinians. On the contrary, intense Israeli military pressure, including reoccupation of Palestinian cities in the West Bank, the emergence of a new, more pragmatic Palestinian leadership and a resolute, hands-on American approach after a victorious war in Iraq all contributed to some major changes in Palestinian policy. That change was a willingness to consider ending terrorism in order to achieve Palestinian goals through international — especially American — pressure on Israel. The new Palestinian policy was based on acceptance of the road map, which outlined a series of steps for Israel and the Palestinians to take on the way to a two-state solution in line with the vision outlined by President Bush on June 24, 2002. In the summer of 2002, U.S. State Department officials drafted a step-by-step plan for achieving the vision. They invited representatives of the European Union, the United Nations and Russia to join the United States as a diplomatic "Quartet" to finalize the document and lend it greater international credibility. The Palestinians accepted the road map immediately, while the Israelis expressed reservations and belatedly agreed to the plan in late May. Less than a month earlier, P.A. President Yasser Arafat had bowed to international pressure and appointed Abbas as the new P.A. prime minister. After Israel´s acceptance of the plan, which Sharon pushed through Israel´s Cabinet over strong right-wing opposition, Sharon adopted an unprecedentedly conciliatory tone toward the Palestinians. "It´s not right for Israel to rule over 3.5 million Palestinians," he declared. Two days later, he used the word "occupation" for the first time to describe the presence of Israeli forces in parts of the West Bank and Gaza Strip. On May 29, Sharon — who had refused to meet with Arafat because of his ties to terrorism — underlined the changed diplomatic climate by meeting with Abbas. Abbas and Sharon met again on June 4, this time with Bush and Jordan´s King Abdullah, at a summit at the Red Sea port of Aqaba that was designed to kick-start the peace process. Abbas declared an end to the armed uprising against Israel, renounced terrorism against Israelis "wherever they might be" and acknowledged "Jewish suffering through the ages." Sharon, for his part, declared that it was in Israel´s interest "for the Palestinians to govern themselves in their own state." The process survived more violence in the immediate aftermath of the summit, and on June 29, Palestinian terrorist groups announced a unilateral cease-fire. But they called it a "hudna" — an Islamic term indicating a temporary suspension of hostilities for the purposes of rearming. Over the course of the next week, Israel withdrew troops from the Gaza Strip and Bethlehem, handing over security control to the P.A. forces. The transfer of further cities to P.A. control was contingent on the Palestinians´ fulfillment of their obligations under the road map. The road map´s main demand was that the Palestinians act to prevent terrorism by dismantling terrorist groups and collecting their weapons. But the Palestinian leadership refused to act, instead focusing on Israel´s obligations to dismantle illegal West Bank settlement outposts and — a demand not in the road map — calling for the release of more than 6,000 Palestinian prisoners from Israeli jails. They also complained about a security fence Israel was building to keep terrorists from the West Bank out of Israel proper. Their complaints found a receptive ear at the White House where, after a meeting with Abbas in late July, President Bush urged Israel to build the security fence as closely as possible to the Green Line, the boundary that divides Israel proper from the West Bank, captured from Jordan in 1967. Meanwhile, Israel announced that it would release several hundred Palestinian prisoners as a goodwill gesture. But Abbas´ popularity among Palestinians remained low, and his failure to act against terrorists increasingly concerned Israel and the United States. He resigned on Sept. 6 after just 100 days in office. Abbas charged that he had been undercut by the United States, Israel and Arafat. Arafat then tapped Ahmed Karia, speaker of the Palestinian legislative council, to replace Abbas. Israel, however, viewed the turn of events warily, blaming Arafat for the ongoing violence and the failure to take the process forward. Calling him an "obstacle" that must be "removed," the Israel government decided in principle on Sept. 11 to expel Arafat, sparking a wave of Palestinian protest. In contrast with the political tumult on the Palestinian side, Sharon commanded a strong position among Israelis, despite a strong of corruption scandals connected to the prime minister, his party and his family. Sharon led the Likud Party to a landslide victory in early elections called for Jan. 28, winning 38 seats in the 120-member Knesset. The main opposition part, Labor, won only 19. The secular Shinui emerged as Israel´s third-largest party with 15 seats, ahead of the fervently Orthodox Shas Party with 11. Shinui´s inclusion in the government promised to shake up attitudes to religion and citizenship in Israel and to challenge the Orthodox hegemony over religion. Over Orthodox objections, Interior Minister Avraham Poraz of Shinui announced a plan to offer citizenship to non-Jews who "make a contribution" to Israeli society in fields such as science, commerce, arts or sports. He later withdrew that plan. Poraz also campaigned for the recognition of Reform and Conservative conversions to Judaism in Israel for purposes of religion and citizenship. Orthodox critics accused Poraz of undermining the Jewish and democratic character of the state. Much of Shinui´s electoral success came at the expense of the Labor Party, which suffered a disastrous year. The party´s chairman, Defense Minister Benjamin Ben-Eliezer, sparked the early elections by bolting Sharon´s national unity government in October 2002, ostensibly over budget cuts. In party primaries Nov. 19, Ben-Eliezer lost the leadership to the popular but uncharismatic mayor of Haifa, Amram Mitzna, a neophyte in national politics. After Labor´s election debacle and bitter party infighting, Mitzna resigned on May 4. Shimon Peres, at age 80, a former prime minister and party leader, took over again as Labor´s temporary chairman. The economy remained depressed in 5763, though the relative quiet of the cease-fire helped spark a minor upturn in the summer as Israelis, less concerned for their safety, flocked to stores and American Jewish tourists began returning to the Jewish state. Earlier, Finance Minister Benjamin Netanyahu took steps to boost international confidence in Israel by slashing nearly $2.5 billion from the national budget of $67.5 billion. However, the cuts deepened unemployment, which reached nearly 11 percent with a record 300,000 Israelis out of work. They also hit poorer Israelis who relied on government welfare to boost their incomes. Among them was single-mother Vicki Knafo, 38, who sparked a protest by single mothers against welfare cuts by walking over 125 miles in early July from her home in Mitzpe Ramon to Jerusalem, where she set up a protest camp outside the Finance Ministry. Netanyahu suggested that anyone who could walk from Mitzpe Ramon to Jerusalem could hold down a job to support a family instead of relying on government welfare payments. The standoff between Netanyahu and demonstrators raised fundamental questions about the nature of the Israeli state. Netanyahu claimed that he was weaning poor Israelis from a culture of handouts to a culture of work. His critics argued that he was destroying Israel´s welfare state and widening already large gaps between Israel´s rich and poor.Leslie Susser is the diplomatic correspondent for the Jerusalem Report.