President Bush (search) on Monday laid out a checklist for Israel and Palestine to achieve peace with two independent states, including an insistence that the Palestinians get contiguous land in the West Bank.

"A state on scattered territories will not work," Bush said during a speech in the first overseas trip of his second term.

Bush pressed Israeli Prime Minister Ariel Sharon (search) to be forthcoming on giving up Israeli settlements in the West Bank when peace negotiations on a Palestinian state reach their final stage.

On Sunday, Israel's cabinet agreed for the first time since capturing the West Bank and Gaza 38 years ago to dismantle some of the dozens of Jewish settlements it has built there.

Bush said Israel must freeze settlement activity and help Palestinians build their economy for the peace process to work.

For the Palestinians' part, Bush said their leaders must confront and dismantle terrorist groups, fight corruption, encourage free enterprise and give authority with the people in democracy.

Bush outlined the steps during a wide-ranging speech designed to repair strained relationships with Europe. Bush put the Israeli-Palestinian conflict (search) at the top of a list of common goals between the U.S. and its allies.

"Our greatest opportunity and immediate goal is peace in the Middle East," Bush said.

Bush pledged U.S. and European support to help implement a U.S. backed schedule for achieving peace and an independent Palestinian state and help the Palestinians build their economic, political and security institutions.

He said he hoped Palestinian leader Mahmoud Abbas (search) will lay out a plan for reform at a conference in London next month hosted by British Prime Minister Tony Blair. Bush said he's sending Secretary of State Condoleezza Rice "to convey America's strong support for the Palestinian people as they build a democratic state."