However, the Palestinians were sceptic and angry. "Netanyahu's remarks have sabotaged all initiatives, paralysed all efforts being made and challenges the Palestinian, Arab and American positions," said Nabil Abu Rdeineh, a close aide to Palestinian Authority (PA) President Mahmoud Abbas.

Reacting angrily to Netanyahu's assertions that Palestinian refugees will not be allowed to settle in Israel and undivided Jerusalem will stay its capital, Rdeineh said that "this will not lead to complete and just peace". "Our main demand is the end of the occupation and finding a fair solution for Palestinian refugees and halting settlements. Other details should be resolved in negotiations," he said.

In Gaza, Hamas spokesman Sami Abu Zuhri called the speech "racist" and asked Arab nations to "form stronger opposition". Political analysts said the move was aimed at pleasing the US. The mass-circulated Yediot Aharonot said "Netanyahu's speech was meant for one pair of ears... the ears of (US President) Barack Obama."

However, hardline Foreign Minister Avigdor Lieberman said the speech outlined "the balance between our aspirations for peace and the aspiration for security." Eli Yishai, head of the ultra-Orthodox Jewish Shas party, also said Netanyahu "stressed his commitment to plausible peace and security." Netanyahu vowed that Israel would not build any new settlements and would refrain from expanding existing Israeli settlements in the West Bank but his government must be allowed to accommodate "natural growth" in population in these settlements.

The hawkish leader has so far been adamant that a settlement freeze is unfeasible and that he would concentrate on strengthening the Palestinian economy, rather than agreeing to their statehood. Netanyahu reiterated that Israel has no desire to control the Palestinian people and declared that both nations should be able to live side by side in peace. "We want both Israeli and Palestinian children to live without war," he said adding, "We must ask ourselves why has peace not yet arrived after 60 years?"

... contd.