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Bush said he's convinced that both Israeli and Palestinian leaders understand "the importance of democratic states living side by side" in peace, and noted that he has a one-year deadline for progress on his watch.
"I'm on a timetable," he told reporters. "I've got 12 months."
He said he is not sure that the problem of Hamas, a militant Islamic group that took over the Gaza Strip in June, can be solved within that time frame. Hamas, he said, was elected to help improve the lot of Palestinians, but "has delivered nothing but misery."
Standing alongside Palestinian President Mahmoud Abbas, Bush said he is confident that "with proper help, the state of Palestine will emerge."
"I am confident that the status quo is unacceptable, Mr. President, and we want to help you," Bush said.
Bush is on a three-day visit to Israel and the West Bank to show support for renewed Israeli-Palestinian peace talks following seven years of violence.
"The question is whether or not hard issues can be resolved and the
vision emerges, so that the choice is clear amongst the Palestinians," Bush
said. "The choice being, `Do you want this state? Or do you want the status
quo? Do you want a future based upon a democratic state? Or do you want the
same old stuff?"'
"We want a state, of course," Abbas said in English.
The Palestinian leader called on Israel to fulfill its commitments under a 2003 U.S.-backed Mideast peace plan. The plan calls on Israel to halt settlement activity in the West Bank, while requiring the Palestinians to dismantle militant groups. Neither side has fully carried out its obligations.
"We start with you a new year, hoping that this will be the year for the creation of peace," Abbas told Bush.
Abbas aide Yasser Abed Rabbo said that the Palestinian president would raise two key issues with Bush in a working lunch
-- a Palestinian call that Israel lift checkpoints and freeze settlements.
Even though it's Bush's first trip to the Palestinian West Bank, it generated little excitement among Palestinians, who are largely skeptical of his promises to try to move along Israeli-Palestinian peace talks. The U.S. is perceived in the Palestinian areas as a staunch ally of Israel, at the expense of the Palestinians, but Abbas said Bush's visit "that gives our people great hope," Abbas said.
Heavy fog, which forced Bush to drive, rather than fly to Ramallah, meant that he got an unexpected glimpse of the daily frustrations faced by Palestinians trying to move around the West Bank, nominally a Palestinian territory but one heavily controlled by the Israeli military. On his drive, Bush passed through a security checkpoint, and drove within sight of the Israeli separation barrier that Palestinians call an unacceptable wall.
Bush said he expects both Israelis and Palestinians to honor their obligations under the peace plan backed by the U.S., and that Israelis should help the Palestinians modernize their security forces.
"In order for there to be lasting peace, President Abbas and Prime Minister Olmert have to come together and make tough choices," Bush said. "And I'm convinced they will. And I believe it's possible
-- not only possible, I believe it's going to happen -- that there be a signed peace treaty by the time I leave office (in January 2009). That's what I believe."
Bush's trip through the Mideast does not include a stop in Gaza, an area controlled by Hamas, which swept Palestinian parliamentary elections in 2006. Hamas later led a violent takeover of the Gaza Strip, essentially splitting Palestinian governance. Hamas, which does not recognize Israel's right to exist, now runs Gaza, while Abbas and his secular Fatah Party, backed by the United States, now run the West Bank.
That split is a major stumbling block to any negotiated peace pact.
While Bush claims that Hamas has failed to help improve the lives of Palestinians living in Gaza, the president acknowledged that he doesn't know whether Abbas' government can resolve the Palestinian division before the end of the year.
"Gaza's a tough situation," Bush said. "I don't know whether you can solve it in a year or not."
But it won't be solved, Bush said, unless Abbas lays out a choice to the people in Gaza: He defined that as: "Do you want those who have created chaos to run your country? Or do you want those of us who negotiated a settlement with the Israelis that will lead to lasting peace."
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 "There is a competing vision taking place in Gaza," Bush said. "And in my judgment, Hamas
-- which I thought ran on the campaign, 'We're going to improve your lives through better education and better health'
-- has delivered nothing but misery."
Fawzi Barhoum, a Hamas spokesman in Gaza, quickly dismissed Bush and Abbas' hopeful comments.
"This meeting was for public relations only, it was an empty meeting without results, only more dreams and waste of time," the Hamas spokesman said. "The meeting focused on the so-called security topics which mean to act against the interests of the Palestinian majority and the resistance."
Bush also jabbed Israel for security polices that could carve up Palestinian territory into unworkable or ungovernable chunks.
"Swiss cheese isn't going to work when it comes to the outline of a state," Bush said. To be viable, a future Palestinian state must have "contiguous territory," he said.
The president also said that he understands Palestinian frustrations over checkpoints throughout the West Bank but says they're necessary for now to give Israelis a sense of security.
"Checkpoints create frustrations for people. They create a sense of security for Israelis. They create massive frustration for the Palestinians," Bush said.
"The whole object is to create a state that is capable of defending itself internally and giving confidence to its neighbor that checkpoints won't be needed."
In Jerusalem, Israeli government spokesman Mark Regev said his government shares the belief that the "current status quo is far from desirable."
"The purpose of the process we're in now is to create a new reality that will be better for both the Israeli and Palestinian peoples," Regev said.
On Wednesday, Olmert said "there will be no peace" unless attacks are halted from all parts of the Palestinian territories. Olmert, however, said that both sides "are very seriously trying to move forward" on a peace agreement.
"Israel does not tolerate and will not tolerate the continuation of these vicious attacks," Olmert said after 2 1/2 hours of talks with Bush. "We will not hesitate to take all the necessary measures. There will be no peace unless terror is stopped. And terror will have to be stopped everywhere."
After Bush's meetings with Abbas, he traveled to biblical Bethlehem to visit Jesus' traditional birth grotto.
Palestinian police arrested two men trying to distribute anti-Bush leaflets in Manger Square. In Ramallah, Palestinian police wielding clubs tried to disperse several dozen Palestinians protesting against Bush's visit. The protest was organized by a Palestinian human rights activist, Mustafa Barghouti, and participants chanted "Bush, get out."
Before going to the West Bank, Bush met with Israeli opposition leader Benjamin Netanyahu and with former prime minister Ariel Sharon's two sons, Omri and Gilad. the former prime minister suffered a massive stroke in January 2006. Netanyahu told Israel Radio that the meeting concentrated on the Iranian threat to Israel.
"Our meeting dealt mostly with the Iranian issue, but also with other things," he said. "I raised my positions and I didn't feel that we were on different sides."
After the 45-minute meeting, Netanyahu gave Bush an ancient coin symbolizing the connection of the Jewish people to Jerusalem.
[Associated
Press; By ANNE GEARAN]
Associated Press Writers Mohammed Daraghmeh and Diaa Hadid in Ramallah contributed to this report.
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