Though annexation itself seems to be up in the air, one of annexation’s expected consequences is already materialising: a crisis of faith among those whose Zionist belief in the legitimacy of a Jewish state depended on there being at least the possibility of an eventual two-state solution, but who now see that prospect vanish before their eyes.

Speaking for them and for many others is Peter Beinart, the American Jewish journalist who has long been an eloquent spokesperson for contemporary liberal Zionism. This week he published a 7,000-word essay declaring the conventional two-state solution dead. “The harsh truth is that the project to which liberal Zionists like myself have devoted ourselves for decades — a state for Palestinians separated from a state for Jews — has failed,” he wrote. He called instead for Jews to accept the binational reality that has arisen in Eretz Yisrael/historic Palestine and to make that society democratic and equal. “It is time for liberal Zionists to abandon the goal of Jewish–Palestinian separation and embrace the goal of Jewish–Palestinian equality.”

The argument he makes is nuanced and complex; it deserves to be read in full. But its core premise is hard to dispute: that the two-state solution, elusive for decades, is now fully out of reach. Too much of the land that should form a future Palestinian state has been taken by Israel for that state to be viable. Beinart quotes the Israeli writer Noam Sheizaf in saying Israelis’ “revealed preference”, revealed through continued settlement of the West Bank and the repeated re-election of Binyamin Netanyahu, a lifelong opponent of Palestinian sovereignty, is to render the two-state vision impossible.

The result is that Israel is the de facto ruler of the land between the river and the sea and so the perennial question is now unavoidable: does Israel grant equality to all those it rules?

If it does not, then two nightmarish possibilities beckon: either this Greater Israel is, as former prime ministers Ehud Barak and Ehud Olmert both warned, an apartheid state or, and Beinart raises this as a serious prospect, it moves towards “policies of mass expulsion”. Both scenarios are morally unpalatable, and the previous alternative — two states — is a dead letter.

The only option left, says Beinart, is equality for all those who live in the land. That, he writes, should not terrify Zionists, because the first Zionists’ main objective was, as Ze’ev Jabotinsky himself put it, “not a Jewish state, but a Jewish collective life”. That can exist inside a binational state.

There are criticisms to be made from both left and right, and critics have already made them. From the left comes the view that it’s arrogant for Jews to make this move: the people who need to decide whether they’re ready to abandon a Palestinian state for the goal of equality in a shared entity are not diaspora Jews but Palestinians. This is their move to make. From the right comes the observation that Beinart is almost comically out of step with Israeli political reality, in which even Netanyahu’s chief opponent at the last election has acquiesced in annexation and in which a genuine two-state position, let alone a single state, has become confined to the margins.

My worry is different. Beinart writes that the obstacle standing in the way of Zionist Jews letting go of Jewish statehood is their fear of genocide at the hands of the Palestinians, a fear bound up with the trauma of the Holocaust. But this makes a crucial mistake. Yes, it’s true that the Holocaust persuaded most Jews they needed to live as a majority in a state of their own, but the threat they imagined, and imagine still, is not narrowly from the Palestinians or even the wider Arab world. The fear instilled in the 1940s, which lives on, is of a genocidal threat that could come from anywhere — even in a place where Jews were as comfortable as they were in pre-war Germany.

That was the lesson Jews learned from the Shoah, the lesson that converted many of them to Zionism. And so when Beinart suggests new, binational models — emulating, say, Belgium or Northern Ireland or perhaps a confederation involving two states within a state — the question many Jews will ask is: would this new arrangement guarantee a Jewish refuge if the horrors of 80 years ago were to recur somewhere in the world?

If the decision to admit a wave of Jews fleeing persecution would require the approval of another people, then I suspect even those Jews who agree with Beinart on everything else would break with him on that. And it’s no good saying such fear is irrational, that there’s no such threat to Jews on the horizon: this is not a decision for the next year or two, but for decades and centuries ahead.

There are ways to meet those concerns: in a confederation, each of the two states might insist on control over its own migration policy. But such things shouldn’t be allowed to distract us from the challenge Beinart has laid down, one that goes far beyond Netanyahu’s day-to-day vacillations over annexation.

He has posed a difficult, but essential question that goes to the heart of the core Jewish project of the last century, pressing us to recognise the reality that Israeli Jews and Palestinians now inhabit a single political space.

The hope of a two-state solution allowed many Jews to hide from that reality. Now it’s vanishing, we can hide no longer.

Jonathan Freedland is a columnist for the Guardian