ANNAPOLIS, Nov 27: US President George W. Bush announced on Tuesday that Israel and the Palestinians had agreed to a joint document that might ultimately lead to the creation of a Palestinian state and hoped that the two sides will be able to reach a peace treaty before the end of next year.

“We meet to lay the foundations for the establishment of a new nation, a democratic Palestinian state that will live side by side with Israel in peace and security,” Mr Bush said at a news conference in Annapolis, near Washington.

At the opening ceremony, Mr Bush stood at a lectern with Israeli Prime Minister Ehud Olmert on his right and Palestinian President Mahmoud Abbas on his left.

After Mr Bush read the joint statement signed by two sides, Mr Olmert and Mr Abbas reached across the lectern and clasped hands in front of the US leader, then took their seats. Later, the two leaders also embraced each other.

Mr Bush has stressed the need for creating an independent state of Palestine at least three times since Monday evening, telling the Israelis that this state would provide them “with something they have been seeking for generations: to live in peace with their neighbours.”

Mr Abbas, speaking after President Bush, said that “the path of peace is the only choice.” He thanked the international community for its support and urged Israel to end its occupation of Palestinian territories and to free political prisoners. “Our region stands at a crossroads,” Mr Abbas said. “This opportunity might not be repeated.”

Mr Abbas claimed that public opinion in both Palestine and Israel favoured a peace process. “Peace is not impossible to achieve if there is a will,” he said. “Freedom is the single word that stands for the future of the Palestinians and captures the meanings of all their generations,” he said. “It is their sunshine and it is the life that inspires their future. It is the last word voiced by the martyrs and victims, and it is the song their prisoners sing.”

Directly addressing Mr Bush, President Abbas said: “Mr President, what we are facing today is not just the challenge of peace, but we are facing a test of our credibility as a whole: the United States, members of the quartet, and all members of the international community, Israel, the Palestine Liberation Organisation and the Palestinian Authority, the Arab and Islamic group, as well.”

He urged the international community to back “the solution of two states, based on ending occupation and the establishment of the state of Palestine side by side to the state of Israel, and the resolution of all issues relating to the Palestinian-Israeli conflict.”

Responding to Mr Bush’s call for establishing a Palestinian state, the Israeli prime minister said he was willing to work with the international community to find a proper framework for creating such a state in the territories agreed between the two sides. But he warned that the negotiations for creating such a state “will not take place here in Annapolis but rather in our home and in your home. These negotiations will be bilateral, direct, ongoing, and continuous, in an effort to complete the process in the course of 2008.” Negotiations for a Palestinian state, he said, will address “all of the issues which we have thus far avoided dealing with.”

Mr Olmert also availed this opportunity to urge Muslim and Arab states to recognise Israel. “The time has come to end the boycott,” he said. “It does not help you, and it hurts us.” He added: “We are ready. . . . Together we shall start. Together we shall arrive.”

The US media noted that this was the right platform Mr Olmert to make such an appeal. This is the first occasion that all 22 members of the Arab League are participating in peace talks with Israel. Two Arab states -- Saudi Arabia and Syria -- that have so far avoided direct talks with Israel are also attending the conference. As many as 40 countries, including Pakistan and India, have sent senior diplomats to the conference, which is depicted in the US media as the biggest peace show put together by the Bush administration in seven years.

The talks are aimed at jump-starting negotiations for creating a Palestinian state and Mr Bush, who is close to the end of his second and final tenure, wants this to be remembered as a historic occasion.

“Future generations will look to the work we began here at Annapolis,” said Mr Bush. They will give thanks to the leaders who gathered on the banks of the Chesapeake for their vision, their wisdom and courage to choose a future of freedom and peace.” Mr Bush, who no longer has to fear the public opinion, kept referring to the need for creating a separate state for Palestinians in every statement he made at the conference or outside. “Today, Palestinians and Israelis each understand that helping the other to realise their aspirations is the key to realising their own -- and both require an independent, democratic, viable Palestinian state,” he said.

Such a state, he said, will provide the Palestinians with the chance to lead lives of freedom, purpose and dignity and allow Israelis to live in peace with their neighbours.

He claimed that participants of this peace conference share a common goal: “two democratic states -- Israel and Palestine -- living side by side in peace and security.”

Mr Bush assured the participants that the Middle East peace will be a high priority until he leaves office in January 2009.

Some media commentators pointed out that Mr Bush’s new peace initiative reflects his desire to be remembered also as a president who made serious efforts for resolving the Palestinian dispute and not only as the one who went to war against other nations.