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Netanyahu, in an address seen as his response to Obama, refused to heed the U.S. call for an immediate freeze of construction on lands Palestinians claim for their future state. He also said the holy city of Jerusalem must remain under Israeli sovereignty.

''I call on you, our Palestinian neighbors, and to the leadership of the Palestinian Authority: Let us begin peace negotiations immediately, without preconditions,'' he said, calling on the wider Arab world to work with him. ''Let's make peace. I am willing to meet with you any time any place -- in Damascus, Riyadh, Beirut and in Jerusalem.''

''Our right to form our sovereign state here in the land of Israel stems from one simple fact. The Land of Israel is the birthplace of the Jewish people,'' he said.

''In my vision, there are two free peoples living side by side each with each other, each with its own flag and national anthem,'' he said.Netanyahu has said he fears the West Bank could follow the path of the Gaza Strip -- which the Palestinians also claim for their future state. Israel withdrew from Gaza in 2005, and Hamas militants now control the area, often firing rockets into southern Israel.''In any peace agreement, the territory under Palestinian control must be disarmed, with solid security guarantees for Israel,'' he said.

'If we get this guarantee for demilitarization and necessary security arrangements for Israel, and if the Palestinians recognize Israel as the state of the Jewish people, we will be willing in a real peace agreement to reach a solution of a demilitarized Palestinian state alongside the Jewish state,'' he said.

Netanyahu gave no indication as to how much captured land he would be willing to relinquish. However, he ruled out a division of Jerusalem, saying, ''Israel's capital will remain united.''

''We have no intention to build new settlements or expropriate land for expanding existing settlements. But there is a need to allow residents to lead a normal life. Settlers are not the enemy of the nation and are not the enemy of peace -- they are our brothers and sisters,'' he said.

Netanyahu also said the Palestinians must recognize Israel as a Jewish state. The Palestinians have refused to do so, fearing it would amount to giving up the rights of millions of refugees and their descendants and discriminate against Israel's own Arab minority.Although the Palestinians have agreed to demilitarization under past peace proposals, Erekat rejected it, saying it would cement Israeli rule over them.

Mr. Netanyahu says he wants to give Palestinians freedom to govern themselves, but won't grant them all the powers of statehood, such as an independent army that could pose a threat to Israel. "We do not want to govern the Palestinians," he said. "We want them to live in peace and govern themselves absent a handful of powers."

Mr. Netanyahu has said he is ready to resume negotiations immediately on three parallel tracks dealing with political, economic and security issues, but the Palestinians have said they won't resume negotiations until Mr. Netanyahu accepts their right to statehood.

"By failing to endorse the two-state solution, Benjamin Netanyahu missed yet another opportunity to show himself to be a genuine partner for peace," Mr. Erekat said after the meeting. "Calling for negotiations without a clearly defined end-goal offers only the promise of more process, not progress."

Mr. Obama spoke out against Israel's expansion of Jewish settlements. Construction of settlements in the West Bank has continued despite pledges to halt such building by former Prime Minister Ariel Sharon. "Settlements have to be stopped in order for us to move forward," Mr. Obama said.

Mr. Netanyahu said after the meeting that Israel would halt settlement expansion as part of a mutual process in which the Palestinians also made concessions, such as cracking down on militants.

Though Israel has shown little interest in the Arab peace initiative, Mr. Netanyahu appears to share the belief that, in the face of an ascendant Iran, there is a new window of opportunity. "In the life of the Jewish state there's never been a time when Arabs and Israelis see a common threat like we see today," he said.

On Iran, Mr. Obama said the U.S. will give talks more time, but that there must be a "clear timetable at which point we say, these talks aren't making any progress."

Mr. Netanyahu has been seeking clear timetables for U.S. diplomatic outreach toward Tehran, and assurances that sanctions would follow if negotiations fail. Israel fears Iran is within months of producing enough fissile material to produce an atomic bomb, though Israeli and U.S. intelligence officials believe it could take Iran years to assemble one.

An aide to Palestinian President Mahmoud Abbas, meanwhile, said Sundaythat the speech "sabotages" regional peace efforts, due to Netanyahu's refusal to accept an influx of Palestinian refugees into Israel and his unwillingness to compromise on the status of Jerusalem.

"Netanyahu's remarks have sabotaged all initiatives, paralyzed all efforts being made and challenges the Palestinian, Arab and American positions," said Nabil Abu Rudeinah.

Netanyahu pledged in the address that Jerusalem be the undivided capital of Israel and that Palestinian refugees not be allowed into Israel

A senior Palestinian negotiator, meanwhile, called on U.S. President Barack Obama to intervene to force Israel to abide by previous interim agreements that include freezing settlement activity in the West Bank. The alternative, he said, was violence. "President Obama, the ball is in your court tonight," Saeb Erekat said. "You have the choice tonight. You can treat Netanyahu as a prime minister above the law and ... close off the path of peace tonight and set the whole region on the path of violence, chaos, extremism and bloodletting.

"The alternative is to make Netanyahu abide by the road map," he said, referring to a U.S.-sponsored document under which Israel agreed to freeze settlement activity and Palestinians agreed to rein in militants hostile to Israel. "The peace process has been moving at the speed of a tortoise," Erekat added. "Tonight, Netanyahu has flipped it over on its back."

Speaking of the development and deployment of a nuclear weapon, he said, “We’re not going to create a situation in which talks become an excuse for inaction while Iran proceeds.” Mr. Obama added that he intended to “gauge and do a reassessment by the end of the year” on whether the diplomatic approach was producing results.

He said he expected international talks with Iran, involving six nations including the United States, to begin shortly after the Iranian elections in June, with the possibility of “direct talks” between the United States and Iran after that.

“The logic of Netanyahu’s argument is, ‘What do you do if your power of diplomacy and toughened sanctions doesn’t work?’ ” said Aaron David Miller, a former Middle East negotiator in both Democratic and Republican administrations. “Anyone who was expecting a major rift in the U.S.-Israeli relationship is going to be disappointed.”

Mr. Netanyahu did not explicitly embrace a two-state solution, as Mr. Obama had hoped. Rather, he said, “I want to make it clear that we don’t want to govern the Palestinians; we want to live in peace with them.”

Mr. Obama, meanwhile, pressed Mr. Netanyahu to freeze the construction of Israeli settlements on the West Bank. “Settlements have to be stopped in order for us to move forward,” Mr. Obama said. “That’s a difficult issue. I recognize that. But it’s an important one, and it has to be addressed.”

Mr. Miller, the former Middle East negotiator, characterized the session as “President ‘Yes We Can’ sitting down with Prime Minister ‘No You Won’t.’ ”

"It is possible to resolve the territorial aspect of settlement construction," Netanyahu said yesterday following his meeting with Sarkozy. "It is possible to find a formula but this requires good will of all sides. What is important is to enable people to live normal lives and that is what I am explaining to the Americans."

Another option that was reported yesterday in Haaretz is a "temporary freeze" of settlement construction, except for projects that have already begun. "The main consideration is how long the freeze will remain in place and whether this may be a precedent that will transform the temporary hiatus into a permanent one," a source close to Netanyahu said.

Mr. Netanyahu said Tuesday that his government would support a “Palestinian security apparatus that will fight terrorism” — apparently a reference to the forces being trained in an American-backed program under the Annapolis framework.

In 1996, Mr. Netanyahu prided himself on his establishment of a lean cabinet, with 18 ministers. The government established by Mr. Olmert in May 2006 had 25.

In Israel, however, public criticism has focused on the sheer size of the new cabinet, swelled by Mr. Netanyahu’s attempts to satisfy his coalition partners’ competing demands. With 30 ministers and at least 7 deputy ministers, the cabinet has grown into the largest in Israel’s history, prompting charges that it will prove unmanageable and constitute a waste of public funds during a recession.

Mr. Netanyahu has so far emphasized his plans for economic development in the West Bank. His refusal to endorse the two-state solution has led to skepticism and despondency on the Palestinian side, exacerbated by fears that his government will expedite Jewish settlement expansion in the West Bank.

Meanwhile, not all Israelis accept the gloomy forecasts of strained relations with Washington. “As long as Hamas is in power in Gaza, we are off the hook,” said Efraim Inbar, a professor of political science at Bar-Ilan University. Under these circumstances, “nobody can really pressure Israel to do anything,” he said in a telephone interview.

The prime minister's bureau did not respond to Sarkozy's remarks nor deny them, but the office of Foreign Minister Avigdor Lieberman did respond with a strong condemnation. "If the words attributed to the president of France are correct, the interference of a president of a respected democratic state in the matters of another democratic state is a grave and intolerable thing. We expect that that regardless of political stance, every political body in Israel will condemn this callous attack by a foreign state in our domestic affairs."

Both Israeli Arab and rightist political leaders blasted the speech as political spin, while President Shimon Peres praised it as "strengthening Israel's international position and opening the door to direct peace negotiations." "The Prime Minister's speech was a true and courageous speech that referred to the main issue - the establishment of a demilitarized Palestinian state alongside the state of Israel, the state of the Jewish People," said Peres.

MK Aryeh Eldad (National Union) accused Netanyahu of violating his own promises and said the nationalist camp could no longer support his policies. "Today the prime minister lost the leadership of the nationalist camp by not only transgressing his own red lines, but by converting from his own religion," said Eldad of Netanyahu's declaration that he would accept the creation of a Palestinian state so long as the international community could guarantee it remains demilitarized. "With the expression 'demilitarized Palestinian state,' Netanyahu is trying to eat a pig butchered in a kosher way," he added. "There is no such thing as a demilitarized state, Netanyahu knows very well that no political force on earth can prevent a country from arming itself or signing military treaties like any other country."

MK Zevulun Orlev, of the Jewish Home party, said that the policy represented a drastic change in stance and was an affront to the coalition agreement.

Army radio also said the government would commit to working against unauthorised Jewish settlements in the West Bank. With Labour's support, Mr Netanyahu would have 66 seats in the 120-member Knesset, or parliament.

Israel's centre-left Labour party has narrowly voted to join a coalition government led by Benjamin Netanyahu of the right-wing Likud.

The far right Yisrael Beiteinu and ultra-Orthodox Jewish party Shas have already agreed to join the coalition. The centrist Kadima has so far refused to join over policy differences.

If he won support from all of Labour's MPs, he would command 66 seats in the 120-member Knesset, or parliament.

He wants to have Labour on board in order to calm widespread fears that a narrowly right-wing Israeli government could jeopardise renewed peace efforts with the Palestinians.

About half of the party's 13 lawmakers objected to Mr Netanyahu because of his long-standing opposition to peace efforts which Labour has backed, Haaretz newspaper reports. Mr Netanyahu has refused to sign up to the two-state formula which has underpinned more than 15 years of Israeli-Palestinian peace efforts.

Some delegates chanted "disgrace" as the result came in. Mr Barak is defence minister in the current government and would retain the post in the next government, reports suggest.

Under the draft coalition agreement, Labour would get five cabinet posts and the government would commit to continuing negotiations with the Palestinians and to respecting previous deals made with them. Army radio said the government would commit to working against unauthorised Jewish settlements in the West Bank.

A Likud member of the Knesset, Yuli-Yoel Edelstein, said there was general agreement between Likud and Labour on the main international challenges facing the incoming government.

"Because in practical terms, I don't think that either side really believes that it's possible to reach an agreement with the present Palestinian leadership in the near future."

In what appears to be a concession to win Labour's support, he and Barak agreed a joint platform that would commit the new government to working for a "comprehensive regional agreement for peace and co-operation in the Middle East", according to the Israeli press.Though that platform says the new government will work towards peace with its neighbours and will respect Israel's international agreements, there was no explicit mention of the creation of an independent Palestine.

Binyamin Netanyahu, head of the right-wing Likud party, will be prime minister and possibly finance minister.• Avigdor Lieberman, the far-right head of the Israel Our Home party, who campaigned in favour of a law demanding all Israel's Arabs swear an oath of loyalty to the country as a Jewish state, will be foreign minister.• Ehud Barak (below), head of the Labour party, who last month seemed resigned to going into opposition, will stay on as defence minister.• Eli Yishai, the head of the ultra-Orthodox Shas party, will be interior minister.

Nabil Abu Rdainah, a spokesman for Mahmoud Abbas, the Palestinian president, dismissed the speech, saying: "Netanyahu's remarks have sabotaged all initiatives, paralysed all efforts being made and challenges the Palestinian, Arab and American positions."

Saeb Erekat, the Palestinians' senior negotiator, called on Obama to intervene to force Israel to abide by previous interim agreements that include freezing settlement activity in the West Bank. "The peace process has been moving at the speed of a tortoise. Tonight, Netanyahu has flipped it over on its backm," he said.

This is the first occasion that Netanyahu has endorsed the creation of a Palestinian state, but many see a disarmed Palestinian state as handing too much power to Israel. "Netanyahu did not accept the principle of a two-state solution," Lamis Andoni, Al Jazeera's Middle East analyst, said. "He reduced the concept of a Palestinian state to that of a demilitarised entity that would remain under Israeli control. 

"This is at best a formula to establish a Palestinian Bantustan that will not end the Israeli occupation but would legitimise Israeli control."

The Palestinians have said that they will not restart negotiations unless Netanyahu publicly backs the two-state solution and stops the building of Jewish settlements on Palestinian land.

He said there would be an end to new settlement building, but vowed that Jerusalem would remain undivided. Addressing Palestinian, Netanyahu urged them to recognise Israel as a Jewish state. "Israel is the nation state of the Jewish people and so it shall remain," he said.

The Israeli leader offered to talk to the Palestinians immediately and with "no preconditions".

"We want to live with you in peace as good neighbours," he said.

Agreeing the principle of a Palestinian state, he said Israel would "be prepared for a true peace agreement [and] to reach a solution of a demilitarised Palestinian state alongside the Jewish state". But only if "we receive this guarantee for demilitarisation and the security arrangements required by Israel, and if the Palestinians recognise Israel as the nation of the Jewish people".

Mr Netanyahu also said he was willing to go to Damascus, Riyadh and Beirut in pursuit of a Middle East peace deal.

Mr Netanyahu stuck to a similar line, saying: "The Palestinian refugee problem must be resolved outside the borders of the state of Israel. "Any demand to resettle refugees within Israel undermines Israel as a state for the Jewish people."

Another key issue the two sides have failed to agree on is the status of Jerusalem. Mr Netanyahu insisted the city must be the "united capital of Israel", although Palestinians want it divided to allow them to locate the capital of a future state there.

the issue of Palestinian refugees who fled or were forced from their homes in what is now Israel in 1948 and 1949. The Palestinians say they and their millions of descendants have the right to return to Israel - which would mean an end to its Jewish majority - but Israel has consistently rebuffed that demand.

Nabil Abu Rdainah, a spokesman for Palestinian Authority President Mahmoud Abbas, said the Israeli leader's speech "torpedoes all peace initiatives in the region".

Another Abbas aide, Yasser Abed Rabbo, told the AFP news agency that recognition of Israel's Jewish character was a demand for Palestinians "to become part of the global Zionist movement".

While the militant Hamas movement, which controls the Gaza Strip, said the speech reflected Mr Netanyahu's "racist and extremist ideology".

The head of the Mossad, Meir Dagan, said last week that Iran may obtain the technology to build an atomic weapon by 2014.

Last week, the Economist called for the United States to reduce its aid to Israel if the Netanyahu government continues to reject a two-state solution.  The Boston Globe offered a similar view earlier this week, advising Obama to tell Netanyahu "to take the steps necessary for peace or risk compromising Israel's special relationship with America." A few days ago, Ha’aretz reported that the Obama Administration was preparing Congressional leaders for a possible confrontation with the Netanyahu government.

We already know what it means for the United States to put pressure on the Palestinians, because Washington has done that repeatedly -- and sometimes effectively -- over the past several decades.  During the 1970s, for example, the United States supported King Hussein’s violent crackdown on the PLO cadres who were threatening his rule in Jordan. During the 1980s, the United States refused to recognize the PLO until it accepted Israel’s right to exist.  After the outbreak of the Second Intifada, the Bush administration refused to deal with Yasser Arafat and pushed hard for his replacement. After Arafat's death, we insisted on democratic elections for a new Palestinian assembly and then rejected the results when Hamas won. The United States has also gone after charitable organizations with ties to Hamas and backed Israel’s recent campaign in Gaza.

In short, the United States has rarely hesitated to use its leverage to try to shape Palestinian behavior, even if some of these efforts -- such as the inept attempt to foment a Fatah coup against Hamas in 2007 -- have backfired.

The United States has only rarely put (mild) pressure on Israel in recent decades (and never for very long), even when the Israeli government was engaged in actions (such as building settlements) that the U.S. government opposed.  The question is: if the Netanyahu/Lieberman government remains intransigent, what should Obama do?

4. Downgrade existing arrangements for “strategic cooperation.”  There are now a number of institutionalized arrangements for security cooperation between the Pentagon and the Israel Defense Forces and between U.S. and Israeli intelligence. The Obama administration could postpone or suspend some of these meetings, or start sending lower-grade representatives to them.

2. Change the Rhetoric. The Obama administration could begin by using different language to describe certain Israeli policies.  While reaffirming America’s commitment to Israel’s existence as a Jewish-majority state, it could stop referring to settlement construction as “unhelpful,” a word that makes U.S. diplomats sound timid and mealy-mouthed.  Instead, we could start describing the settlements as “illegal” or as “violations of international law.”

U.S. officials could even describe Israel’s occupation as “contrary to democracy,” “unwise,” “cruel,” or “unjust.”  Altering the rhetoric would send a clear signal to the Israeli government and its citizens that their government’s opposition to a two-state solution was jeopardizing the special relationship.

3. Support a U.N. Resolution Condemning the Occupation.  Since 1972, the United States has vetoed forty-three U.N. Security Council resolutions that were critical of Israel (a number greater than the sum of all vetoes cast by the other permanent members)

If the Obama administration wanted to send a clear signal that it was unhappy with Israel’s actions, it could sponsor a resolution condemning the occupation and calling for a two-state solution.

1. Cut the aid package? If you add it all up, Israel gets over $3 billion in U.S. economic and military aid each year, which works out to about $500 per Israeli citizen. There’s a lot of potential leverage here, but it’s probably not the best stick to use, at least not at first. Trying to trim or cut the aid package will trigger an open and undoubtedly ugly confrontation in Congress (where the influence of AIPAC and other hard-line groups in the Israel lobby is greatest). So that’s not where I’d start.

There is in fact a precedent for this step: after negotiating the original agreements for a “strategic partnership,” the Reagan administration suspended them following Israel’s invasion of Lebanon in 1982. Today, such a step would surely get the attention of Israel’s security establishment.

5. Reduce U.S. purchases of Israeli military equipment. In addition to providing Israel with military assistance (some of which is then used to purchase U.S. arms), the Pentagon also buys millions of dollars of weaponry and other services from Israel’s own defense industry. Obama could instruct Secretary of Defense Robert Gates to slow or decrease these purchases, which would send an unmistakable signal that it was no longer "business-as-usual." Given the battering Israel’s economy has taken in the current global recession, this step would get noticed too.

6. Get tough with private organizations that support settlement activity. As David Ignatius recently noted in the Washington Post, many private donations to charitable organizations operating in Israel are tax-deductible in the United States, including private donations that support settlement activity. This makes no sense: it means the American taxpayer is indirectly subsidizing activities that are contrary to stated U.S. policy and that actually threaten Israel’s long-term future.  Just as the United States has gone after charitable contributions flowing to terrorist organizations, the U.S. Treasury could crack down on charitable organizations (including those of some prominent Christian Zionists) that are supporting these illegal activities. 

7. Place more limits on U.S. loan guarantees. The United States has provided billions of dollars of loan guarantees to Israel on several occasions, which enabled Israel to borrow money from commercial banks at lower interest rates.  Back in 1992, the first Bush administration held up nearly $10 billion in guarantees until Israel agreed to halt settlement construction and attend the Madrid peace conference, and the dispute helped undermine the hard-line Likud government of Yitzhak Shamir and bring Yitzhak Rabin to power, which in turn made the historic Oslo Agreement possible.

8. Encourage other U.S. allies to use their influence too. In the past, the United States has often pressed other states to upgrade their own ties with Israel.  If pressure is needed, however, the United States could try a different tack.  For example, we could quietly encourage the EU not to upgrade its relations with Israel until it had agreed to end the occupation.

most of these measures could be implemented by the Executive Branch alone, thereby outflanking die-hard defenders of the special relationship in Congress.  Indeed, even hinting that it was thinking about some of these measures would probably get Netanyahu to start reconsidering his position.

Most importantly, Obama and his aides will need to reach out to Israel’s supporters in the United States, and make it clear to them that pressing Israel to end the occupation is essential for Israel’s long-term survival.

He will have to work with the more far-sighted elements in the pro-Israel community -- including groups like J Street, the Israel Policy Forum, Brit Tzedek v'Shalom,  and others

In effect, the United States would be giving Israel a choice: it can end its self-defeating occupation of Palestinian lands, actively work for a two-state solution, and thereby remain a cherished American ally.  Or it can continue to expand the occupation and face a progressive loss of American support as well as the costly and corrupting burden of ruling millions of Palestinians by force.

Indeed, that is why many—though of course not all--Israelis would probably welcome a more active and evenhanded U.S. role. It was former Prime Minister Ehud Olmert who said "if the two-state solution collapses, Israel will face a South-Africa style struggle for political rights." And once that happens, he warned, “the state of Israel is finished."

The editor of Ha’aretz, David Landau, conveyed much the same sentiment last September when he told former Secretary of State Condoleezza Rice that the United States should "rape" Israel in order to force a solution. Landau's phrase was shocking and offensive, but it underscored the sense of urgency felt within some segments of the Israeli body politic.

It remains to be seen whether Lieberman would be willing to accept a truly independent Palestinian state — Netanyahu has indicated that he won't, insisting, in the name of the Jewish state's security, that Israel control the air space and borders of such an entity, and have veto over its military and foreign policies. Netanyahu's track record, however, is also more pragmatic than ideological. Despite his open loathing of Yasser Arafat, his previous government in 1998 signed a deal with the late PLO leader for the withdrawal of Israeli forces from parts of the West Bank, including the sensitive biblical town of Hebron.

Publicly, at least, Netanyahu continues to take a hard line, rejecting the idea of an Israeli withdrawal from the Golan Heights in order to get peace with Syria. Lieberman talks only of "peace for peace," rather than land for peace. But Netanyahu knows that no peace deal is possible without returning the Syrian territory captured in the war of 1967, and he may be ready to find a formula for its return if Syria is truly ready for a peace deal.

Syrian President Assad, having established firm control of the often opaque regime he inherited from his late father, Hafez al-Assad, appears to be willing to pick up where his father left off in seeking a deal with Israel. Assad was instrumental in starting indirect, Turkish-mediated talks with Israel despite initial opposition by the Bush Administration

In the past, two former Labor Prime Ministers, the late Yitzhak Rabin and Barak, were ready to withdraw from almost all of the Golan Heights. Netanyahu himself may have been, too: during his first term as Prime Minister, he reportedly ran a back-channel negotiation with the Syrians.

President Obama recently sent two senior officials to Damascus to test the waters, signaling Washington's willingness to end its campaign to isolate Syria.

early success on the Israel-Syria track would do wonders for the Administration's wider Middle East ambitions. Not only would it formally cement the 40-plus years of relative calm on the Israeli-Syrian frontier, it would potentially detach Syria from its alliance with Iran, and enlist Damascus in moderating or eliminating two key radical elements — Hamas and Hizballah — on Israel's borders

Iran's resulting loss of influence in the region could, in turn, help induce Tehran to rethink its more confrontational positions, particularly on the nuclear issue.

Mr Barak said he thought such an agreement could be reached between Israel and its neighbours within three years, and take another five years to implement. However, some members of Mr Netanyahu's Likud party cast doubt on Mr Barak's views. Transport Minister Yisrael Katz said the prime minister would "oppose any creation of an armed Palestinian state on Israel's borders, which would endanger Israel's security," the AFP news agency reported.

in an address to US supporters of Israel at the start of May Mr Netanyahu said he favoured a "triple track" approach. Political progress must be combined with a strengthening of the Palestinian security apparatus and moved to stimulate the Palestinian economy, he said.

But the White House called the policy outline an "important step forward", as did French Foreign Minister Bernard Kouchner.

Mr Erekat added: "The peace process has been moving at the speed of a tortoise. Tonight, Netanyahu has flipped it over on its back."

In Gaza, Hamas spokesman Sami Abu Zuhri described the speech as "racist" and called on Arab nations to "form stronger opposition" towards Israel.

A White House statement said Mr Obama "believes this solution can and must ensure both Israel's security and the fulfilment of the Palestinians' legitimate aspirations for a viable state, and he welcomes Prime Minister Netanyahu's endorsement of that goal".

In his own keynote Middle East speech in Cairo on 4 June, Mr Obama stressed that he wanted all settlement activity to stop. But Mr Netanyahu said settlers were not "enemies of peace" and did not move from his position of backing "natural growth" in existing settlements.

The settlers group Yesha condemned Mr Netanyahu's speech: "We deplore that the prime minister has agreed to the creation of a demilitarised Palestinian state after he has said for years that such a state, even demilitarised, would be a threat to Israel."

The king also pressed Mr Netanyahu to stop Israeli settlement building on Palestinian land and "seize the current historic opportunity to make peace with the Arabs".

The BBC's Paul Wood in Jerusalem says the frantic activity is because Israel fears being diplomatically isolated ahead of his Washington trip. On Monday, King Abdullah warned that failure to reach an agreement for peace in the Middle East would result in a new conflagration within 12-18 months.

In comments to a UK newspaper, he said the US was finalising a comprehensive solution to Israel's conflicts with the Palestinians, Syrians and Lebanese that would involve all 57 Arab and Muslim states. Our correspondent says everything appears to be leading towards a visit by President Obama to Cairo next month, during which he is expected to announce his support for the Jordanian plan in some form.