Marking the end of mourning for Yasser Arafat (search), his emerging successor said Tuesday that he remains committed to a peace deal with Israel that would produce a Palestinian state with Jerusalem as a capital.

Mahmoud Abbas (search) spoke at Arafat's old headquarters, to which the Palestinian leader had been confined for nearly three years, until just days before his Nov. 11 death at a Paris hospital. Tuesday marked the end of the 40-day Muslim mourning period for Arafat.

Abbas, the PLO chief, is the front-runner in Jan. 9 elections to replace Arafat as Palestinian Authority president, which would seal his status as Arafat's successor.

"We are standing here today to reiterate to the world that we are committed to the choice of just peace, to achieve the rights of our people," Abbas said.

Referring to Arafat, Abbas said: "We will continue the struggle to make your dream and our dream come true and to have a Palestinian child raise the Palestinian flag on the walls of Jerusalem, the capital of our independent Palestinian state."

Abbas said he would follow Arafat's legacy, as outlined in a speech by the late Palestinian leader in the summer. In that speech, Arafat acknowledged he had made mistakes in running the Palestinian Authority and promised government reform.

Pledging that "nobody will be above the law," Abbas said the Palestinians are moving toward democracy.

Israeli Foreign Minister Silvan Shalom said in an interview published Tuesday in The Jerusalem Post daily that he was "discouraged" by Abbas' refusal to distance himself from Arafat, whom Israel had shunned as a leader tainted by terror. It was the strongest Israeli criticism of Abbas since Arafat's death.

Abbas and Arafat often fought bitterly, with Arafat blocking government and security reform, and the disagreements prompted Abbas to resign as prime minister in 2003. However, Abbas has been careful not to criticize Arafat's legacy, in part because he wants to harness his enduring popularity during the election campaign.

About 250 people, including dignitaries from Jordan and Egypt, local Christian and Muslim leaders, and diplomats attended the memorial service in a hall inside the compound. Several hundred people paid their respects outside.

A large picture of Arafat was displayed in the hall, with a picture of Jerusalem's Dome of the Rock mosque in the background under the slogan: "Following in your footsteps, we will realize the Palestinian dream," the picture said. A poster of Abbas, with Arafat in the background, had the same slogan.

In the West Bank city of Nablus, about 20,000 people, including 250 armed men, participated in a memorial ceremony for Arafat. The gunmen fired into the air virtually nonstop for more than an hour.

"We will follow Arafat's path until we have an independent state of our own," said Ala Sanakri, a member of the Al Aqsa Martyrs' Brigades (search), a violent group tied to Arafat's Fatah movement. While gunmen are a common sight in Nablus, it was the largest public gathering of armed militants in months.

The end of the mourning period fell on a day crammed with Mideast diplomacy.

World Bank president James Wolfensohn was holding meetings with Israeli and Palestinian leaders Tuesday to talk about more aid for the Palestinian Authority.

The World Bank wants to raise US$500 million in additional aid, but has linked the money to an easing of Israeli travel restrictions on Palestinians and Palestinian reform efforts.

"The donors, essentially, today, having gone through the intefadeh (Palestinian uprising), are going to want to feel that if they put in an additional $500 million (a year), that it's being done seriously and with an opportunity for a viable area," Wolfensohn told the Israeli daily Haaretz.

International donors, led by the United States and Europe, already provide more than $900 million in assistance to the Palestinians each year. But donors have complained that four years of fighting have greatly limited the effectiveness of the aid.

Later Tuesday, British Prime Minister Tony Blair was due for talks in the West Bank and Israel, the highest-ranking visitor since Arafat's death.

Blair is considering hosting a Mideast conference in London. However, even before the invitations were sent out, Israel and the Palestinians disagreed strongly over its purpose, and Israel decided not to attend.

The Palestinians want a high-level conference that would push negotiations on the touchy issues that have stymied peace efforts in the past — Jerusalem, Jewish settlements, borders and Palestinian refugees.

The Israelis say the subject should be much more limited — reforms in the Palestinian administration, which they criticized for a lack of accountability, and failure of security forces to crack down on militant groups.

In London, the British Foreign Office appeared to back Sharon. "This meeting is about Palestine and practical reforms within Palestine," it said. No date has been set.

"This has never been conceived of as a major peace conference," said a Foreign Office spokeswoman, speaking on condition of anonymity.

Sharon prefers to concentrate on his plan to remove all 21 Jewish settlements from the Gaza Strip and four from the West Bank next summer.

On Monday, as Sharon moved to shore up his shaky government to provide a comfortable Cabinet majority in favor of the plan, settler leaders called for resistance, even if it means thousands going to jail. It was the first time settler leaders have publicly advocated breaking the law.

The moderate opposition Labor Party, strongly in favor of the pullout plan, scheduled meetings of its institutions on Tuesday to approve entering Sharon's coalition, and a new, pro-pullout government was expected to take office next week.

Settler leader Bentsi Lieberman said the settlers oppose violence and would not use force against soldiers involved in the evacuation.