Obama praises 'positive movement' in Netanyahu speech

"I think it is important not to immediately assess the situation based on commentary the day after a speech," Obama said, after meeting Italian Prime Minister Silvio Berlusconi in the Oval Office.

"I think any time an Israeli prime minister makes a statement, the immediate reaction tends to be negative on one side. If the other side is making a statement oftentimes the reaction is negative in Israel."

"Overall, I thought that there was positive movement in the prime minister's speech. He acknowledged the need for two states."

"There were a lot of conditions," Obama said, adding that working through Israel's conditions for security and the Palestinian conditions of sovereignty could be addressed in negotiations.

"What we are seeing is at least the possibility that we can restart serious talks."

'Settlements an impediment to progress'

Netanyahu on Sunday endorsed for the first time the creation of a Palestinian state, provided it was demilitarized, after weeks of pressure from Washington.

But he also said the Palestinians must recognize the Jewish character of Israel, a condition Palestinian President Mahmud Abbas has long rejected.

He also ruled out a halt to all Jewish settlement activity as demanded by the United States, European Union, United Nations and Russia.

Obama called again on Monday for a halt to settlements.

"Both sides are going to have to move in some politically difficult ways in order to achieve what is going to be in the long term interests of the Israelis and the Palestinains," Obama said.

"On the Israeli side that means a cessation of settlements."

"There is a tendency to try to parse exactly what this means – but I think the parties on the ground understand that if you have a continuation of settlements that in past agreements have been categorized as illegal, that is going to be an impediment to progress."

Netanyahu: I expected a better response

Meanwhile Monday night, Prime Minister Netanyahu addressed the negative responses to his speech, particularly in the Arab world.

"I'm disappointed because I took a step, not an easy step," he told the CBS television network. "I suppose I'd like a better response. And maybe it'll sink in over time. But I think I've opened the door for peace. And I hope that the Palestinians and the Arab world respond to it."

Netanyahu said he hoped to reach an understanding with the American administration during his meeting with Mideast envoy George Mitchell in Paris next week, in regards to construction for natural growth purposes in the settlement

"We won't build new settlements, we won't expropriate additional land for the existing settlements," he stated. "I hope that my government and the Obama administration can find a common position on this because we'd like to move the peace process forward."

Netanyahu said he hoped to create a joint mechanism with the Americans to examine what Israel could and could not build. "We know that this is an issue of contention. We'd like to put it behind us and get on with peace negotiations, direct between us and the Palestinians."

He explained that "the question of not expanding the territory is different from freezing life. You know, you have children there. You have babies that are born. What do you do with them? You have to give them kindergartens. You have to give them schools. Can you build a classroom or not? Can you build a kindergarten or not?

"What we talked about is just continuing normal life without prejudging the territorial outcome, without grabbing new land…. We really want to have people live normal lives until that final peace agreement is reached. Then we'll decide on the rest."

He reiterated his stance that the Palestinian state must be demilitarized and that the Palestinians must recognize Israel as a Jewish state. "I didn't put them down as conditions or preconditions to begin negotiations," he clarified.

According to Netanyahu, a demilitarized Palestinian state was "An equitable formula for peace in the Israeli public and among Israel's friends and the supporters of peace abroad".