Kerry says two-state solution 'not an impossible dream'

US Secretary of State John Kerry told an Israeli gathering at the United Nations on Wednesday that a two-state solution in the Middle East was "not an impossible dream" but would require courage.

Kerry travelled to the UN headquarters in New York to attend a commemoration of the 1975 speech delivered by Israeli ambassador Chaim Herzog denouncing a UN resolution that declared Zionism a form of racism.

The top US diplomat cast a rosy light on Zionism at the event, saying: "The Zionist dream embraces the concept of Israel as a Jewish democracy, a beacon of light to all nations." 

"That dream can only be upheld by two states living side by side in security.

"We all know from years of discussion and efforts: this is not an impossible dream. It is achievable."

Kerry argued that choosing to recognise a Palestinian state "demands courage, demands leadership" and likened that choice to Herzog's actions at the UN 40 years ago.

"Fear and bigotry can be defeated, but those are choices we now get to make. So now it's our turn."

His remarks followed Israeli Prime Minister Benjamin Netanyahu's visit to Washington this week that saw little signs of progress in efforts to revive Israeli-Palestinian peace talks.

Those talks have been comatose since Kerry's failed peace mission in April last year. 

The call for an Israeli-Palestinian settlement resonated at the United Nations, where reviving the peace process is becoming a top agenda item at the Security Council.

Council members are weighing a draft resolution, presented by New Zealand, that declares the two-state solution as "the only credible pathway to peace" and demands that both sides prepare for new talks.

International diplomats desperately want to revive peace talks to avoid a slide into more violence that many fear could lead to a third Palestinian intifada.

The Secretary of State’s comments came on the heels of an EU decision to issue guidelines calling on all produce originating from Israeli settlements to be clearly labelled. 

The Israeli reaction to the EU’s decision was harsh, with Israeli leaders likening the decision to actions taken by Nazi Germany. Netanyahu compared the action to the Nazi boycott of Jewish businesses.

"The labelling of products of the Jewish state by the European Union brings back dark memories. Europe should be ashamed of itself," he said in an English-language video clip posted on Facebook.

"It [the EU] took an immoral decision ... this will not advance peace, it will certainly not advance truth and justice. It's wrong."

On Tuesday, in anticipation of the move, Israeli Energy Minister Yuval Steinitz called the labelling measure "disguised anti-Semitism".

A weeks-long wave of violence has claimed the lives of at least 77 people on the Palestinian side - one of them an Israeli citizen - along with 10 Jewish Israelis. Many of the Palestinians killed were alleged attackers.