As Egyptians celebrate their new-found freedom, across the desert, Israel is keeping a wary eye on the development of the new, (hopefully) democratic government in Cairo.

Israel and Egypt fought four wars before signing a peace treaty in the 1970s. Hosni Mubarak, the president who was just deposed, worked with his predecessor to become the first Arab state to recognize Israel.

It is for fear of a breach of this treaty that the events in Cairo have many Israelis worried. However, the Egyptian military has promised that it will honor the agreement.

Israel should not worry. In fact, Israel and the international community – especially the United States – should take this opportunity to solve the Israeli-Palestinian conflict once and for all.

This is the ideal moment to complete the peace process. The dictatorship of Egypt, the country at the heart of the Arab world, has just fallen. Solving the Israeli-Palestinian issue will complete this Middle East revolution.

For the Israeli leadership in Tel Aviv, too, there is reason that now should be the moment for peace in the Promised Land. Although the new Egyptian government will not violently oppose Israel, there will be elections in six months, and you can bet your milk and honey that it won’t be nearly as friendly as Mubarak was.

Equally important, the Israelis have never had a more reasonable Palestinian authority to work with. Salam Fayyad, the wonkish Palestinian prime minister, has done more to build a Palestinian state than any suicide bomber could have dreamed. And it’s worked: 2010 was Israel’s most peaceful year in a decade, and the skyrocketing Israeli economy shows it.

Palestinians, at least in the West Bank where Fayyad has authority, are enjoying the fruits of economic development as well. Under the Fayyad plan, unemployment has been reduced by a third and the economy grew faster China’s last year  with 11% annual growth. (I wish Washington could create that kind of growth.)

Fayyad’s plan is to have a de facto Palestinian state in place by the end of the year. Israel should prefer to make a deal with a weaker Palestinian state now, rather than with a full-fledged nation later.

Most importantly, the United States has a stake in this. The old expression in the Mideast peace talks is that “The United States can’t want peace more than the parties themselves.” That is simply not true. The Israeli-Palestinian conflict is at the heart of our involvement in the Middle East. Most Islamic terrorists, including the leadership of Al-Qaeda, point to the Palestinian cause as justification for their violence. On top of that, much the Arab world feels resentment toward the West because of the conflict.

If we resolve the issue this year, we can concern ourselves less with the possibility of terror attacks and oil supply disruptions and focus more on creating jobs, strengthening our schools, and winning the future.

The US must get the ball rolling in peace talks, and we need to demonstrate that this is it. If Israel will not make the concessions necessary for peace, Washington must be willing to cut off the billions of dollars in aid we (hopelessly) pour into Israel each year.

The outlines of the final Israeli-Palestinian peace accord have long been known; the difficulty is in getting the two sides to sign on the dotted line. This is the opportune moment to do so. The US just has to prove that we want it.