U.S. Secretary of State Condoleezza Rice assured Palestinian leaders Thursday that a U.S.-sponsored Mideast peace conference this fall is meant to get them closer to establishing an independent state and that Israel is ready now to discuss fundamental issues.

Palestinian President Mahmoud Abbas, during a meeting with Rice, also signaled willingness to compromise, saying he's ready to work on a "declaration of principles" as a step toward a full peace deal. Israeli Prime Minister Ehud Olmert floated such an idea last week, but Abbas hadn't commented until Thursday.

Rice met with Abbas at his headquarters and signed an agreement granting the Palestinians $80 million for reform of their security services. She said she's likely be back in the region before this fall's international conference, which is being promoted by the U.S. administration.

Hamas denounced the latest show of U.S. support for Abbas and the Cabinet of moderates he installed after firing the Hamas-led government following the Islamic militants' violent takeover of Gaza in June. Hamas spokesman Sami Abu Zuhri said Rice "is not coming to establish a Palestinian state but to build death squads that will work against resistance groups, including Hamas."

In the West Bank, Rice said in a joint news conference with Abbas that U.S. President George W. Bush wants to see progress toward Palestinian statehood at the conference.

Rice said regional leaders, including those in Saudi Arabia, told her during her current Mideast swing that the conference must deal with issues of substance. "Prime Minister Olmert told me last night that he, too, shared that view, that this was a meeting that ought to be and needs to be substantive and meaningful and that will, in fact, help get to a two-state solution," Rice said.

"The president of the United States has no desire to call people together for a photo opportunity. This is to call people together so that we can really advance Palestinian statehood," she said.

Olmert's office said in a statement Thursday that the Israeli leader "shares the same approach, that the international meeting will be serious and meaningful, and that he welcomes the participation of leaders of Arab countries in the meeting."

Abbas, meanwhile, said he's ready to negotiate a declaration of principles as an interim step. Such a declaration, as envisioned by Israel, would outline the contours of a future Palestinian state, without immediately tackling the most explosive issues, such as final borders and the fate of Palestinian refugees.

Abbas said Thursday that once such a declaration has been negotiated, "what is important is that we arrive at a result and that we know what that result is, what is the roof that we need to reach and what are the stages of implementation that we can agree on."

Abbas aide Yasser Abed Rabbo said the Palestinians remain skeptical, despite the outpouring of international goodwill toward their new government "I can't be optimistic until I see the Israelis accepting the Arab peace initiative and the international community committed to observing the implementation of a peace treaty, and a timetable for implementing this treaty," he said.

Earlier Thursday, Rice met with the entire Cabinet of Prime Minister Salam Fayyad, a gesture of support for the team of moderates that replaced the Hamas government after the Islamic militants seized Gaza by force. Rice was introduced to the ministers, then addressed them in the Cabinet room.

On Wednesday, Rice had met with Olmert and Israeli Foreign Minister Tzipi Livni.

Livni said Israel will push quickly for a political settlement with the West Bank. "Israel is not going to miss this opportunity," Livni said.

Livni said the West Bank can "be an example" for cooperation or negotiations with Israel.

"The implementation of any kind of understanding between Israel and the Palestinian government can be in accordance to the places of the territories in which there is an effective government," Livni said.

The Bush administration, which has been tentatively exploring a renewed peace initiative for months, insists that the fall of Gaza to Hamas is actually a moment of hope.

"We do have in the Palestinian territories a government that is devoted to the ... foundational principles for peace, and this is an opportunity that should not be missed," Rice said Wednesday.

Their words confirmed what has been an increasingly obvious strategy: Isolate the Hamas government in the Gaza Strip while lavishing money, and political legitimacy on Abbas and his new government.

Israel has released frozen tax money as a sign of good will, and in a symbolic gesture freed hundreds of Palestinian prisoners. Thousands more remain in Israeli jails, but the move lent Abbas street credibility he has often lacked.