RAMALLAH, Dec 22: British Prime Minister Tony Blair said on Wednesday a planned London conference on Palestinian reform would be a critical step toward Middle East peace talks and a Palestinian state.

Mr Blair, speaking after talks with Palestinian and Israeli leaders, was on the highest-level diplomatic mission to the region since Yasser Arafat's death last month, which has revived international peace efforts after years of bloody stalemate.

Both Israeli Prime Minister Ariel Sharon and emergent Palestinian leader Mahmoud Abbas endorsed Mr Blair's plans. But in signs of discord over priorities, when Mr Blair referred at a news conference with Palestinian leaders to the paramount need to "stop terrorism", they pointedly said Israel must also halt settlement building in the occupied West Bank.

Mr Blair told both sides the one-day meeting in early March of US, European and UN leaders, Arab states and the World Bank aimed to strengthen a moderate, democratic succession to Mr Arafat that could negotiate peace with Israel.

The conference would assess ways to make Palestinian institutions more democratic, less corrupt and equipped to rein in militants who have seized de facto power in the streets and resisted truce proposals mooted by veteran moderates like Mahmoud Abbas.

"What is important is that we can make progress after months and years in which there has been none," Mr Blair said. A Foreign Office statement issued in London said the conference would lay groundwork for meetings of aid donors and private investors to help fuel Palestinian reconstruction.

In earlier remarks after talks with Sharon, Mr Blair brushed off suggestions Israel's limited, unilateral plan to evacuate tiny Gaza aimed to forestall a wider West Bank pullout implied by a roadmap peace plan that US-led mediators hope to revive.

"I certainly have understood him (Sharon) to be saying very, very clearly that, provided terrorism stops, disengagement (from Gaza) is not the last word," he said. Sharon agreed, but he has also vowed to keep large West Bank settlements under any conceivable Middle East peace deal.

ABBAS FOR PRESSURE ON ISRAEL: Mr Blair, echoing the US and Israeli line, said talks on a Palestinian state could not bear fruit unless Palestinians put a stop to militant attacks beforehand.

"Viability cannot just be about territory, it also has to be about proper (Palestinian) democratic institutions, proper security ..." to persuade Israel it could live alongside a Palestinian state, he said in Jerusalem with Sharon beside him.

Abbas, tipped to win a Jan 9 election for a successor to Arafat, praised Mr Blair for organizing the conference but said there should be equal pressure on Israel to comply with roadmap requirements.

"We expect from the Israeli side (at the same time) a stop to the expansion of settlements ... We are very keen and concerned to catch up on the time lost from the last few years.

"We think addressing final status issues (for statehood) is extremely important. We are available to start very quickly on (such road map) negotiations," Mr Abbas said.

Palestinian officials presented Mr Blair's visit as a precursor to implementing the roadmap. "We support British efforts to restart the peace negotiations. We will attend the proposed peace conference," said senior official Tayeb Abdel Rahim.

Sharon has said Israel will not attend the conference and Blair found no problem with that as it would not take up thorny peace issues such as borders and Palestinian refugees on which the two sides remain far apart.

The right-wing Sharon has long resisted the idea of international Middle East conferences, fearing they would exert pressure on Israel to quit all of the West Bank and Gaza. -Reuters

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