In a appearance with Polish Foreign Minister Wlodzimierz Cimoszewicz, Secretary of State Colin Powell said Monday that the Administration's "vision still stands" of an independent Palestine co-existing peacefully with Israel.

Powell welcomed Palestinian Authority Chairman Yasser Arafat's speech of Sunday in which Arafat called for a halt to all "terrorist activities" in a televised speech to mark Eid Al Fitr, a three-day celebration that follows the Muslim holy month of Ramadan.

Bush, too, was honoring the holiday at the White House and invited two dozen Muslim children to celebrate with him in the Diplomatic Reception Room.

Along with the positive remarks, Powell reiterated calls for Arafat to back up his words with action -- a reduction of violence and a crackdown on terrorist elements.

"I hope that all Palestinians will respond to his call to end the violence and to create conditions, once again, where we can start moving toward a cease-fire and moving into the Mitchell process," Powell said referring to the U.S. playbook for peace in the region.

The secretary denied that the U.S. has completely stopped all criticism of Israel and cited some commitments Israel must fulfill as well: recognition that they must exchange land for peace and an end to settlement activity in Palestinian-disputed territories.

On Monday White House spokesman Ari Fleischer also welcomed Arafat's speech.

"They were constructive words indeed but what's necessary now is for him to act on them," Fleischer said.

On Sunday, Powell spoke to Egypt's foreign minister, Ahmed Maher, after Arafat's speech, an Egyptian official said. Maher asked Powell to support the Palestinian leader, saying Arafat had done everything asked of him by the United States and others, said the official, speaking on condition of anonymity.

Maher said he hoped U.S. envoy Anthony Zinni -- summoned back to Washington on Saturday -- soon would return to the region, the official said.

The State Department declined to comment on the conversation.

The Bush administration sought for most of this year to be evenhanded in its dealings with Israel and the Palestinians, often calling for restraint from both sides. On Sunday, however, the U.S. criticism and calls for restraint were directed at the Palestinians.

Powell explicitly defended Israeli reprisals for Palestinian attacks that have killed 40 Israelis in recent days. The retaliations left more than 60 Palestinians dead. Prime Minister Ariel Sharon "has a responsibility to defend the people of Israel," Powell said.

The spiraling violence coincided roughly with the arrival of Zinni, a retired Marine Corps general who went to the Middle East on Nov. 26 seeking to broker a peace agreement.

He pledged to stay in the region "as long as it takes," but the administration pulled him back amid the escalating death toll.

"I sent General Zinni out as our envoy to make this happen. We started to see some progress, Powell said on Fox News Sunday.  "What happened? Hamas, a terrorist organization, started killing innocent civilians with car bombs in Jerusalem, Haifa and elsewhere. And they attacked this process; they attacked innocent Israelis. But even more fundamentally and troubling, they attacked Yasser Arafat and his authority to lead the Palestinian people toward a cease-fire and a process of peace."

Zinni is to consult with Bush and Powell about the situation -- meetings that Powell said were planned all along.

The Israeli government said Wednesday it was severing contact with Arafat, whom it labeled "irrelevant."

Powell and national security adviser Condoleezza Rice said the United States continued to recognize Arafat as the Palestinian leader. But both insisted he do more to halt the violence.

"We're asking no more of Chairman Arafat than we've asked of every responsible leader, and that is not to allow terrorism to continue in areas that you control," Rice said on CBS' Face the Nation.

Fox News' Teri Schultz and the Associated Press contributed to this report.