A federation of Israel and Palestine, two autonomous states with their federal capital in Jerusalem and regional capitals in Ramallah and Tel Aviv. The constitutional arrangements would be similar to those of the European Union. Israelis would have the right to settle, live and work anywhere in the the federation and Palestinians likewise.
Each of the two federated states would be responsible for its own governance, just like the states of the European Union, but the addition of a federal parliament with limited powers (as in the EU) allows all the populace to feel that they are part of one unitary entity in keeping with their ultimate wishes and beliefs. This is a combination of unity and separation.
This proposal solves the problem of Jerusalem, the problem of "right of return" and the problem of the settlements. It would also greatly alleviate the difficulty of the geographical separation of Gaza from the West Bank when constituting the Palestinian state.
Tell me why this is not a good planam I missing something?