Real peace between Palestinians and Israelis will be preceded by two conditions: an Israeli withdrawal from most, if not all, of the occupied territories and genuine democracy in the Palestinian Authority. Attention has usually focused on the first factor, but it has become increasingly evident that the second is just as important. The failure to reform Palestinian institutions will doom any attempt to bring about lasting peace in the Middle East.

The need for reform has been increasingly clear in recent months. The most glaring failure is the Palestinian Authority's inability to maintain law and order within its own territory. That government's failure to rein in Islamic extremists has raised serious questions about its commitment to peace. No matter what one thinks about Israeli policy, no government can participate in, or turn a blind eye to, acts of terrorism without undermining its own credibility and legitimacy.

Israeli Prime Minister Ariel Sharon has consistently demanded a ceasefire before he will negotiate with Palestinian leader Yasser Arafat. Mr. Sharon's position is disingenuous, particularly since his policies have gone a long way toward undermining the Palestinian institutions that have to provide law and order. Nevertheless, he is right to demand that the Palestinian authorities disavow the extremists and their terror tactics, make real efforts to crack the terrorist networks and bring the perpetrators of such atrocities to justice.