RAMALLAH, January 10, 2008 (WAFA)-US President George W. Bush called on Thursday for an end to the 40-year Israeli occupation of Palestinian territories.

"There should be an end to the occupation that began in 1967," President Bush said.

He reiterated that a deal establishing a Palestinian state can be sealed within a year.

"The establishment of a state of Palestine is long overdue. The Palestinian people deserve it, and it will enhance the stability of the region, and it will contribute to the security of the people of Israel. A peace agreement should happen and can happen by the end of this year."

"Security is fundamental. No agreement and no Palestinian state will be born of terror.

He said that any final deal will have to modify the so-called Green Line, Israel's borders before the 1967 Six Day War in which the Jewish state captured the West Bank and east Jerusalem from Jordan, Gaza and Sinai from Egypt and the Golan Heights from Syria.

"While territory is an issue for both parties to decide I believe that any peace agreement between them will require mutually agreed adjustments to the armistice lines of 1949 to reflect current realities and to insure that the Palestinian state is viable and contiguous."

As part of efforts to establish the Palestinian state, he called for new mechanisms to resolve the issue of the Palestinian refugees.

"I believe we need to look to the establishment of a Palestinian state and new international mechanisms including compensation to resolve the refugee issue."

President Bush also called on both parties to adhere to their obligations under the 2003 international Road Map blueprint.

"On the Israeli side that includes ending settlement expansion and removing unauthorised outposts," he said. "On the Palestinian side that includes confronting terrorists and dismantling terror infrastructure."

On the issue of Jerusalem - often considered the most intractable of the core issues dogging the decades-old - Bush said the two sides will have to work it out.

"I know Jerusalem is a tough issue. Both sides have deeply felt political and religious concerns.

"I fully understand that finding a solution to this issue will be one of the most difficult challenges on the road to peace, but that is the road they have chosen to walk.