Bush Pushes Peace While Market Is Attacked

From a whispered conversation to a deafening rocket attack, there were fresh signs of trouble Wednesday on the perilous road toward Mideast peace.

As President Bush greeted Israeli officials at the airport on his arrival, Prime Minister Ehud Olmert drew aside the White House national security adviser, Stephen Hadley, for a few quiet words. A key player in the Mideast talks, Olmert has been weakened by a corruption investigation that has raised doubts about his ability to make compromises necessary for a deal with Palestinian leaders. He has promised to resign if indicted.

"Holding on. Holding on. Don't worry," Olmert told Hadley. Picked up by media microphones, the anxious assurance did little to assuage questions about Olmert's influence or grip on power.

Within hours, there was even more troubling news.

Bush and Olmert met to discuss the peace process and threats to Israel's security - only to learn that a rocket fired from Gaza had slammed into a crowded shopping center in the southern Israeli city of Ashkelon. At least 14 people were wounded. Two militant groups, the Iranian-backed Islamic Jihad and the Hamas-linked Popular Resistance Committees, claimed responsibility.

"What happened today is entirely intolerable and unacceptable," Olmert declared at an Israeli celebration Wednesday night during which Bush was honored. "The government of Israel is committed to stopping it, and we will take the necessary steps so that this will stop." The audience erupted in applause before he finished the sentence.

The White House blamed Hamas, which controls the Gaza Strip. "Political goals will never be achieved by launching rockets from Gaza onto innocent women and children," the U.S. said.

CBS News correspondent Robert Berger said regular citizens on both sides of the divide were quick to voice their pessimism about any lasting peace agreement being reached by the end of the year - a goal Mr. Bush had voiced firm belief in after a summit last year in Maryland.

Berger reported that Israelis blame the Palestinians for the impasse in the peace process and the Palestinians blame Israel - but neither side believes the latest shuttle diplomacy by the American leader will have a significant effect.

Welcomed as Israel's closest ally, Bush was the star guest at an evening of music, dance and speeches marking the 60th anniversary of Israel's founding in the wake of the Nazi holocaust. Bush's approval ratings are at record lows at home, but he got a hero's reception here.

The audience of several thousand people included American businessman Sheldon Adelson, whom Israeli police questioned Monday in the Olmert probe. Wednesday night, the billionaire casino mogul sat in the front row with Bush, first lady Laura Bush and other U.S. and Israeli officials, including Olmert.

In 1948, the United States was the first country to recognize Israel, 11 minutes after the Israelis declared statehood. In that decision, President Harry Truman broke with his secretary of state, George Marshall, and most of the foreign policy community.

"Because Harry Truman did what was right instead of following the conventional wisdom, we can say today that America is Israel's oldest and best friend in the world," Bush said to cheers from conference guests.

"America stands for peace, and so does Israel," Bush said. "And as we stand in peace, we must understand the realities of the world in which we live. We must be steadfast. And we must be strong in the face of those who murder the innocent to achieve their objectives. In the long run, we share a powerful belief and a powerful weapon against the terrorists. We believe that the surest way to defeat the enemies of hatred is to advance the cause of hope through the cause of freedom."

Bush said there will be a day when every child of the Middle East can live in peace and freedom.

Olmert told Bush: "You are an unusual person. You are an unusual leader. And you are an unusual friend of the people of Israel."

Bush's eyes teared up. He received an ovation from the audience and a hug from Olmert.

With barely 250 days remaining in his presidency, Bush is trying to leave his mark with a historic peace agreement and the foundations for a Palestinian state before he leaves office in January.

"I suspect if you looked back 60 years ago and tried to guess where Israel would be at that time, it would be hard to be able to project such a prosperous, hopeful land," Bush said as he opened talks with Israeli President Shimon Peres. "No question people would have said, 'Well, we'd be surrounded by hostile forces.'

"But I doubt people would have been able to see the modern Israel, which is one reason I bring so much optimism to the Middle East, because what happened here is possible everywhere."

Israel's success stands in contrast to the dire poverty suffered by millions of Palestinian refugees and their descendants scattered in the West Bank and Gaza and in desperate camps across the Middle East.

The creation of Israel was the birth of the Palestinian refugee problem; Palestinians refer to Israel's creation as "al-Naqba," or "the catastrophe." Bush is largely seen as a friend and ally of Israel, at the expense of the Palestinians.

While celebrating Israel's birthday in a speech Thursday before the Knesset, the Israeli parliament, Bush is expected to acknowledge that Palestinians view the anniversary very differently. Bush will state his concern for the daily lives of Palestinians and say that Israel is responsible for helping to improve conditions, a senior administration official said. Olmert, in Bush's view, is a partner who agrees with this.

Bush also will look far ahead and offer his vision of Israel on its 120th anniversary - a vision that includes peaceful coexistence with a Palestinian state, White House spokesman Gordon Johndroe said.

"The United States and Israel share a belief that all people have the right to live in peace, that democracy is the best way to ensure human rights, that religious liberty is fundamental to civilized society and that using violence to achieve political objectives is always wrong," Johndroe said in a preview of the speech's themes.

Peres, meeting with Bush in the trellis-covered sandstone portion of his gardens, endorsed Bush's call for Mideast peace, saying Israelis want to work with Palestinians.

"We would like to see the Palestinians living together," he said. "They have suffered a great deal of their life. The separation is a tragedy for them and for the rest of us."

In the Gaza Strip, Hamas called Bush's visit a "bad omen."

"No greetings to you, Bush, on our holy land," said Hamas strongman Mahmoud Zahar. "Your people will punish you one day."

Israeli military raids on the Gaza Strip killed two Palestinian civilians and three militants on Wednesday, Palestinian medical officials said.

Before Bush arrived, Eli Yishai, a right-wing minister in Olmert's Cabinet, said the prime minister had agreed to the construction of hundreds of homes in a West Bank settlement. Olmert spokesman Mark Regev said no decision had been made.

In current peace talks, the Palestinians demand that Israel stop building in areas they both want for a future state, and Israel's failure to do so - despite pressure from the Bush administration - has increased Palestinian disappointment and frustration.