'A New Birth For Their Nation'

The President: For too long, the citizens of the Middle East havelived in the midst of death and fear. The hatred of a few holds the hopes of many hostage.The forces of extremism and terror are attempting to kill progress and peace by killingthe innocent. And this casts a dark shadow over an entire region. For the sake of allhumanity, things must change in the Middle East.

It is untenable for Israeli citizens to live in terror. It is untenable forPalestinians to live in squalor and occupation. And the current situation offers noprospect that life will improve. Israeli citizens will continue to be victimized byterrorists, and so Israel will continue to defend herself.

In the situation the Palestinian people will grow more and more miserable. My vision istwo states, living side by side in peace and security. There is simply no way to achievethat peace until all parties fight terror. Yet, at this critical moment, if all partieswill break with the past and set out on a new path, we can overcome the darkness with thelight of hope. Peace requires a new and different Palestinian leadership, so that aPalestinian state can be born.

I call on the Palestinian people to elect new leaders, leaders not compromised byterror. I call upon them to build a practicing democracy, based on tolerance and liberty.If the Palestinian people actively pursue these goals, America and the world will activelysupport their efforts. If the Palestinian people meet these goals, they will be able toreach agreement with Israel and Egypt and Jordan on security and other arrangements forindependence.

And when the Palestinian people have new leaders, new institutions and new securityarrangements with their neighbors, the United States of America will support the creationof a Palestinian state whose borders and certain aspects of its sovereignty will beprovisional until resolved as part of a final settlement in the Middle East.

In the work ahead, we all have responsibilities. The Palestinian people are gifted andcapable, and I am confident they can achieve a new birth for their nation. A Palestinianstate will never be created by terror -- it will be built through reform. And reform mustbe more than cosmetic change, or veiled attempt to preserve the status quo. True reformwill require entirely new political and economic institutions, based on democracy, marketeconomics and action against terrorism.

Today, the elected Palestinian legislature has no authority, and power is concentratedin the hands of an unaccountable few. A Palestinian state can only serve its citizens witha new constitution which separates the powers of government. The Palestinian parliamentshould have the full authority of a legislative body. Local officials and governmentministers need authority of their own and the independence to govern effectively.

The United States, along with the European Union and Arab states, will work withPalestinian leaders to create a new constitutional framework, and a working democracy forthe Palestinian people. And the United States, along with others in the internationalcommunity will help the Palestinians organize and monitor fair, multi-party localelections by the end of the year, with national elections to follow.

Today, the Palestinian people live in economic stagnation, made worse by officialcorruption.A Palestinian state will require a vibrant economy, where honest enterprise isencouraged by honest government. The United States, the international donor community andthe World Bank stand ready to work with Palestinians on a major project of economic reformand development. The United States, the EU, the World Bank, the International MonetaryFund are willing to oversee reforms in Palestinian finances, encouraging transparency andindependent auditing.

And the United States, along with our partners in the developed world, will increaseour humanitarian assistance to relieve Palestinian suffering. Today, the Palestinianpeople lack effective courts of law and have no means to defend and vindicate theirrights. A Palestinian state will require a system of reliable justice to punish those whoprey on the innocent. The United States and members of the international community standready to work with Palestinian leaders to establish finance -- establish finance andmonitor a truly independent judiciary.

Today, Palestinian authorities are encouraging, not opposing, terrorism. This isunacceptable. And the United States will not support the establishment of a Palestinianstate until its leaders engage in a sustained fight against the terrorists and dismantletheir infrastructure. This will require an externally supervised effort to rebuild andreform the Palestinian security services. The security system must have clear lines ofauthority and accountability and a unified chain of command.

America is pursuing this reform along with key regional states. The world is preparedto help, yet ultimately these steps toward statehood depend on the Palestinian people andtheir leaders. If they energetically take the path of reform, the rewards can comequickly. If Palestinians embrace democracy, confront corruption and firmly reject terror,they can count on American support for the creation of a provisional state of Palestine.

With a dedicated effort, this state could rise rapidly, as it comes to terms withIsrael, Egypt and Jordan on practical issues, such as security. The final borders, thecapital and other aspects of this state's sovereignty will be negotiated between theparties, as part of a final settlement. Arab states have offered their help in thisprocess, and their help is needed.

I've said in the past that nations are either with us or against us in the war onterror. To be counted on the side of peace, nations must act. Every leader actuallycommitted to peace will end incitement to violence in official media, and publiclydenounce homicide bombings. Every nation actually committed to peace will stop the flow ofmoney, equipment and recruits to terrorist groups seeking the destruction of Israel --including Hamas, Islamic Jihad, and Hezbollah. Every nation actually committed to peacemust block the shipment of Iranian supplies to these groups, and oppose regimes thatpromote terror, like Iraq. And Syria must choose the right side in the war on terror byclosing terrorist camps and expelling terrorist organizations.

Leaders who want to be included in the peace process must show by their deeds anundivided support for peace. And as we move toward a peaceful solution, Arab states willbe expected to build closer ties of diplomacy and commerce with Israel, leading to fullnormalization of relations between Israel and the entire Arab world.

Israel also has a large stake in the success of a democratic Palestine. Permanentoccupation threatens Israel's identity and democracy. A stable, peaceful Palestinian stateis necessary to achieve the security that Israel longs for. So I challenge Israel to takeconcrete steps to support the emergence of a viable, credible Palestinian state.

As we make progress towards security, Israel forces need to withdraw fully to positionsthey held prior to September 28, 2000. And consistent with the recommendations of theMitchell Committee, Israeli settlement activity in the occupied territories must stop.

The Palestinian economy must be allowed to develop. As violence subsides, freedom ofmovement should be restored, permitting innocent Palestinians to resume work and normallife. Palestinian legislators and officials, humanitarian and international workers, mustbe allowed to go about the business of building a better future. And Israel should releasefrozen Palestinian revenues into honest, accountable hands.

I've asked Secretary Powell to work intensively with Middle Eastern and internationalleaders to realize the vision of a Palestinian state, focusing them on a comprehensiveplan to support Palestinian reform and institution-building.

Ultimately, Israelis and Palestinians must address the core issues that divide them ifthere is to be a real peace, resolving all claims and ending the conflict between them.This means that the Israeli occupation that began in 1967 will be ended through asettlement negotiated between the parties, based on U.N. Resolutions 242 and 338, withIsraeli withdrawal to secure and recognize borders.

We must also resolve questions concerning Jerusalem, the plight and future ofPalestinian refugees, and a final peace between Israel and Lebanon, and Israel and a Syriathat supports peace and fights terror.

All who are familiar with the history of the Middle East realize that there may besetbacks in this process. Trained and determined killers, as we have seen, want to stopit. Yet the Egyptian and Jordanian peace treaties with Israel remind us that withdetermined and responsible leadership progress can come quickly.

As new Palestinian institutions and new leaders emerge, demonstrating real performanceon security and reform, I expect Israel to respond and work toward a final statusagreement. With intensive effort by all, this agreement could be reached within threeyears from now. And I and my country will actively lead toward that goal.

I can understand the deep anger and anguish of the Israeli people. You've lived toolong with fear and funerals, having to avoid markets and public transportation, and forcedto put armed guards in kindergarten classrooms. The Palestinian Authority has rejectedyour offer at hand, and trafficked with terrorists. You have a right to a normal life; youhave a right to security; and I deeply believe that you need a reformed, responsiblePalestinian partner to achieve that security.

I can understand the deep anger and despair of the Palestinian people. For decadesyou've been treated as pawns in the Middle East conflict. Your interests have been heldhostage to a comprehensive peace agreement that never seems to come, as your lives getworse year by year. You deserve democracy and the rule of law. You deserve an open societyand a thriving economy. You deserve a life of hope for your children. An end to occupationand a peaceful democratic Palestinian state may seem distant, but America and our partnersthroughout the world stand ready to help, help you make them possible as soon as possible.

If liberty can blossom in the rocky soil of the West Bank and Gaza, it will inspiremillions of men and women around the globe who are equally weary of poverty andoppression, equally entitled to the benefits of democratic government.

I have a hope for the people of Muslim countries. Your commitments to morality, andlearning, and tolerance led to great historical achievements. And those values are alivein the Islamic world today. You have a rich culture, and you share the aspirations of menand women in every culture. Prosperity and freedom and dignity are not just Americanhopes, or Western hopes. They are universal, human hopes. And even in the violence andturmoil of the Middle East, America believes those hopes have the power to transform livesand nations.

This moment is both an opportunity and a test for all parties in the Middle East: anopportunity to lay the foundations for future peace; a test to show who is serious aboutpeace and who is not. The choice here is stark and simple. The Bible says, "I haveset before you life and death; therefore, choose life." The time has arrived foreveryone in this conflict to choose peace, and hope, and life.

Thank you very much.