Updated

Israelis welcomed President Bush's outline for Mideast peace, but the Palestinians rejected calls to replace their leadership and sought to focus attention on the call for an eventual Palestinian state.

For Israeli Prime Minister Ariel Sharon, the president's call for new Palestinian leadership was a major achievement in his decades-long duel with Yasser Arafat, whom he has insistently blamed for the terror attacks — even those by anti-Arafat militants — that have plagued Israel for the past 21 months.

Yet it appeared unlikely the Palestinians would soon replace their leadership as a result of the call, and Bush's speech contained no enforcement mechanism — as well as no way of preventing future Palestinian attacks and Israeli military retaliations from derailing diplomatic efforts, as they've done to date.

Arafat, asked on Tuesday whether he believed Bush was calling for his removal, replied: "Definitely not."

Furthermore, neither side appeared to understand fully what Bush meant by the establishment of a "provisional" Palestinian state once the Palestinians reformed their government.

Bush said that "reform must be more than cosmetic changes or a veiled attempt to preserve the status quo" and called on Palestinians to create an accountable, democratic government — something rarely found in the Arab Middle East.

A statement by Sharon's office after the speech said "when the Palestinian Authority undergoes genuine reforms and a new leadership takes its place... it will be possible to discuss ways of moving forward by diplomatic means."

Defense Minister Binyamin Ben-Eliezer of the moderate Labor Party said the speech was "of historical importance due to its central principles that propose a change to Arafat's leadership and an absolute dismissal of terror." He called on the Europeans to back the call, and on Palestinians to comply.

But Palestinian Cabinet minister Saeb Erekat said it was "not acceptable" and noted he was democratically elected in 1996 "and this must be respected."

In a statement issued earlier, Arafat said the Palestinian leadership welcomes Bush's ideas as a "serious effort to push the peace process forward" and hopes "the details will be discussed during the direct and bilateral meetings with the American administration" and international mediators.

Such talks, however, may be a long way off, as U.S. officials have suggested that an international conference on the Middle East which was expected later this summer would be shelved.

Raanan Gissin, spokesman for Sharon, noted that Bush said progress depended on an end to attacks on Israelis. "The bottom line is (end) terrorism first, occupation later," Gissin said.

Palestinian Cabinet Secretary Ahmed Abdel Rahman said Palestinian attacks on Israelis should be viewed as resistance and not terrorism — but said it was significant that Bush explicitly called for a Palestinian state.

"It is the first time that an American administration recognized that the only solution for this conflict is to end the occupation and to have a state to live in peace beside Israel," he said. "This is a historic change in the American stand."

Ziad Abu Zayyad, former Palestinian Cabinet minister, told Israel Radio that it is impossible to institute the changes that Bush demands because Palestinians live under heavy Israeli restrictions.

There was uncertainty over the essentially unprecedented notion of a "provisional" Palestinian state — an ambiguity which, in part, enabled the idea to escape outright rejection by either side.

"I cannot understand what it means to have a provisional state," Abdel Rahman said. "I can understand provisional borders. We will have contacts with the American administration to understand what it means."

Israeli Foreign Minister Shimon Peres also said the ideas needed to be fleshed out. "One speech cannot bring redemption to the world. ... There are still problems left that need to be dealt with and dealt with seriously," he said.

Some have interpreted the provisional state as meaning the Palestinians would, in the first stage, receive sovereignty over the areas where they already have autonomy as a result of the 1990s' Israel-PLO accords — covering about two-thirds of Gaza and about 40 percent of the West Bank, areas where the vast majority of Palestinians live.

That would fall far short of the Palestinians' goal of independence in all of the West Bank and Gaza, with a capital in East Jerusalem. It is also far less than Israel had offered — with the backing of then-President Clinton &3151; in peace talks that fell apart in January 2001.

But the advantage would be that, as an interim arrangement, it would not require the Palestinians to formally renounce any further claims — such as a "right of return" to Israel for Palestinian war refugees — as Israel had demanded in earlier talks.

"It depends on what the president means by a provisional state," said Khalil Shikaki, a respected Palestinian political analyst. "If he means early statehood for the Palestinians without settling final borders, I think this is a move forward (that) could mean a lot — a breakthrough."

But he warned that the Palestinians would need more land even in the early stages to draw a contiguous border around their dozens of islands of territory.

That idea would be resisted by many Israelis.

"The American president would not for a moment like to give terrorism a prize, because he would be undercutting his own efforts to stymie terrorism," said Israeli security analyst Uzi Arad, a former top official of the Mossad intelligence agency. "The consequence could be more acts of terrorism."

In Egypt, President Hosni Mubarak on Tuesday said his country was ready to help the Palestinians reform and added U.S. calls for overhauling the Palestinian administration did not mean Yasser Arafat had to go.

But Arab academics and analysts soundly condemned the speech, with Syrian political analyst Imad Shueibi calling it "the worst speech in the history of U.S.-Arab relations."

"If the Palestinians re-elect Arafat, are they going to be punished?" asked Mohammed el-Sayed Said, Washington bureau chief for the Egyptian daily Al-Ahram.