Where's the deterrence of East Jerusalem terrorists?

From Haaretz, 23/07/2008, by Amos Harel:

Responding to the sharp rise in terrorist attacks in the capital, carried out by Palestinian residents of East Jerusalem, Israeli authorities are keen to expedite procedures that would authorize the resumption of punitive measures, such as the razing of terrorists' homes.

For the second time in three weeks, a Palestinian terrorist went on a rampage with a bulldozer in central Jerusalem. Twenty four Israeli civilians were injured, one seriously, before the driver was shot and killed by a Border Police officer and a civilian. ...

.... Security sources expressed concern Tuesday at the sharp rise in the number of attacks in the capital, and the role of East Jerusalem's Arab residents in them. Since the start of the year there have been five major attacks in Jerusalem, claiming the lives of 12 Israelis.

During the first half of the year, the Shin Bet security service arrested 71 Palestinians from East Jerusalem suspected of being involved in attacks, compared to 37 such arrests during the entire year of 2007.

In the first seven years of the second intifada (which began in September 2000), some 270 East Jerusalem residents were arrested for similar suspicions. The same security sources said that the last three attacks in West Jerusalem (at the Mercaz Harav Yeshiva and the two bulldozer attacks) constitute a new challenge for Israel, and stressed that at present there is no means to counter them.

The combination of a lone terrorist, who decides to attack without having an organizational structure behind him, and the freedom of movement an Israeli identity card guarantees East Jerusalem Arabs, constitutes a weak point in Israel's defenses, making it difficult to prevent similar attacks in the future.

The security sources further said that in the near future, efforts will be made to accelerate those administrative processes that will result in the razing of the homes of the two bulldozer terrorists from East Jerusalem.

Israel ceased destroying the homes of terrorists in 2005. However, as a result of the recent attacks in the capital, Prime Minister Ehud Olmert and Defense Minister Ehud Barak called for resuming the punitive acts...

...Shin Bet Chief Yuval Diskin is in favor of resuming the policy. Speaking at the Knesset prior to Tuesday's attack, he said that Israel faces a "problem of deterrence" in East Jerusalem because it lacks any effective punitive tool, like razing homes.