Occupied Jerusalem: US President George W. Bush, summing up meetings with both sides in the Israeli-Palestinian dispute, said on Thursday that a peace accord will require "painful political concessions" by each.

Resolving the status of occupied Jerusalem will be tough, he said, and called for the end of the "occupation" of Arab land by the Israeli military.

"Now is the time to make difficult choices," Bush said after a first-ever visit to the Palestinian territories, which followed separate meetings with Israeli leaders in occupied Jerusalem the day before. "There should be an end to the [Israeli] occupation that began in 1967," he said.

He also called on Arab states to reach out to Israel in a bid to boost peace negotiations. "I call upon the Arab countries to reach out to Israel, a step that is long overdue," Bush said.

Bush is in the Mideast for eight days, trying to bolster his goal of achieving a long-elusive Mideast peace agreement by the end of his presidency next year.

Speaking at his hotel here, he said he thinks that is possible.

Bush said that disputed territory must be mutually negotiated. However, he said "any agreement will require adjustments" to the borders drawn for Israel in the late 1940s.

At the same time, Bush reiterated that any viable Palestinian state must be "contiguous", saying Palestinians deserve better than a "Swiss cheese" state. But he offered no specifics to resolve the conflicting claims to Jerusalem.