Netanyahu accepts a disarmed Palestinian state

Israeli Prime Minister Benjamin Netanyahu in a keynote speech Sunday said his country could live with a Palestinian state if it is demilitarized and only after Palestinians recognize the right of Israel to exist as a Jewish state.

Netanyahu said before his country could accept a Palestinian state it must receive international guarantees the new nation would have no military.

"The key condition is that the Palestinians recognize in a clear and public manner that Israel is the state of the Jewish people," Netanyahu said.

"The heart of the (Middle East) conflict has always been the Arabs' refusal to accept the existence of the Jewish state," he said. "The withdrawals that Israel has carried out in the past have not changed this reality."

Settlements and refugees

Netanyahu ruled out a complete halt to Israeli settlement activity in the occupied West Bank, as demanded by key ally the United States.

"I do not wish to build new settlements or to confiscate lands to that end, but we have to allow the residents of the settlements to live normal lives," he said, using the stock phrase for allowing construction to accommodate population growth in settlements.

The administration of U.S. President Barack Obama has repeatedly called on Israel to halt all settlement activity in the occupied West Bank.

Netanyahu also declared that the solution of the Palestinian refugee problem must be "outside Israel" and alluded to their potential settlement in neighboring Arab countries.

Palestinians claim that refugees from the 1948-49 war that followed Israel's creation and their millions of descendants have the right to reclaim their original homes.

The key condition is that the Palestinians recognize in a clear and public manner that Israel is the state of the Jewish people

Israeli Prime Minister Benjamin Netanyahu

Palestinian reaction

The Palestinians have said they will not return to the negotiating table until Israel halts all settlement activity, and a spokesman for Abbas slammed the speech.

A spokesman for Palestinian President Mahmoud Abbas dismissed it as "sabotaging" peace efforts.

"Netanyahu's remarks have sabotaged all initiatives, paralyzed all efforts being made and challenges the Palestinian, Arab and American positions," said Nabil Abu Rdainah, noting Netanyahu's demand that Jerusalem be the undivided capital of Israel and that Palestinian refugees not be allowed into Israel.

"This will not lead to complete and just peace," Abu Rdainah said. "His remarks are not enough and will not lead to a solution."

This speech reflects the racist and extremist ideology of Netanyahu and denies all the rights of the Palestinian people

Hamas spokesman Fawzi Barhum

The Islamist Hamas movement slammed the address saying it reflected a "racist and extremist ideology."

"This speech reflects the racist and extremist ideology of Netanyahu and denies all the rights of the Palestinian people," Hamas spokesman Fawzi Barhum told AFP.

"This speech is the reiteration of the policy of his government, which aims at transforming the Palestinian people into a tool to protect the occupation."

U.S. reaction

Obama's White House spokesman said the president welcomed Netanyahu's speech and said he will continue working with all parties to achieve two-state solution and comprehensive peace.

"The President is committed to two states, a Jewish state of Israel and an independent Palestine, in the historic homeland of both peoples," said Robert Gibbs in a statement. "He believes this solution can and must ensure both Israel's security and the fulfillment of the Palestinians' legitimate aspirations for a viable state, and he welcomes Prime Minister Netanyahu's endorsement of that goal."

The President is committed to two states, a Jewish state of Israel and an independent Palestine, in the historic homeland of both peoples

Press Secretary Robert Gibbs

Response to Obama

The speech was billed as a response to Obama's address to the Muslim world 10 days ago in which he reiterated Washington's "unbreakable" bond with Israel but also said the Palestinian situation was "intolerable."

Obama has vowed to aggressively pursue a two-state solution and in recent weeks Washington had ramped up pressure on Israel's new government to endorse the idea of a Palestinian state and halt all settlement activity.

The blunt words to Israel from Obama's administration have raised fears in the Jewish state that Washington may ease its support as it tries to improve its relations with the Muslim world.

This speech is the reiteration of the policy of his government, which aims at transforming the Palestinian people into a tool to protect the occupation

Hamas spokesman Fawzi Barhum

Netanyahu faces a delicate balancing act in responding to American pressure, as most in his largely right-wing 10-week-old coalition oppose U.S. demands on settlements and would probably quit the government if he caves in to the pressure, analysts say.

Before President Obama delivered his major speech to the Muslim World in Cairo early this month a group of far-right Israeli activists launched a campaign of smear against him. The group circulated posters depicting Obama in Arab Palestinian head cover Kufya along with the slogan “Barack Hussein Obama; Anti-Semitic Jew Hater.”

Similar posters with Israeli Prime Minister Yitzhak Rabin in Arab headdress had been circulated by Jewish extremists before he was assassinated in 1995.