Opening a Middle East peace conference in Annapolis, Maryland on November 27, US President George W Bush said all outstanding issues dividing the two sides would be on the table.

"We agree to engage in vigorous, ongoing and continuous negotiations and shall make every effort to conclude an agreement before the end of 2008," Mr Bush said.

He said the first negotiations would start on December 12, with further meetings to be held every two weeks after that. He committed himself to spending the rest of his presidency - until January 2009 - working towards "an independent democratic viable Palestinian state".

Palestinian Authority President Mahmoud Abbas followed with his own speech, saying: "We have to start comprehensive and deep negotiations on all issues of final status, including Jerusalem, refugees, borders, settlements, water and security and others".

He said East Jerusalem should be the capital of the new Palestinian state, something deeply opposed by many Israelis who regard it as part of their own capital.

Meanwhile, Israeli Prime Minister Ehhud Olmert said he had come to Annapolis despite the obstacles posed by continuing violence against the people of Israel. But he added that the "time has come... we want peace".

Mr Olmert agreed that all the core issues dividing the two sides would be on the table, and that Israel would assist Palestinian refugees find a future in the new Palestinian state.