If there was an error, I am the one to blame... We are now badly in need of re-evaluation of our policies and our plans, in order to repair our errors, to correct our march toward independence

Yasser Arafat

Mr Arafat has been under pressure both at home and abroad to carry out reforms, but his latest statement did not present a detailed plan. Instead, he appealed for patience.

He was addressing the Palestinian Legislative Council - for first time since the end of his confinement at his Ramallah headquarters - where he was received in silence punctuated by light applause.

Correspondents said the speech was the first step by the Palestinian leader to shore up his domestic position after drawing only thin crowds on his recent tour of the West Bank.

There has been much criticism at home of his decision to allow the exile of 13 Palestinian militants to end the siege of Bethlehem's Church of the Nativity - which Mr Arafat tried to deflect by saying it might have been a "mistake".

Sharon: Wait and see approach to Palestinian statehood

"I tell you if there was a mistake, I take full responsibility. There are always mistakes in every movement," he said.

Mr Arafat promised a total separation of the PA's judicial, executive and legislative branches, but said such moves would take time to effect.

European foreign policy chief Javier Solana said Mr Arafat had informed the EU that legislative and municipal elections - last held in 1996 - would take place by early autumn.

Mr Arafat made no mention of a new contest for leadership of the Palestinian Authority, which he won by an overwhelming margin in 1996.

Action not words

The United States welcomed the "positive" sentiments expressed in the speech but was now looking for "action that will lead to a better life for the Palestinian people and will enhance the prospects for an enduring peace", White House spokesman Ari Fleischer said.

Yasser Arafat's words are positive. What's important, and the president will wait and see, is whether there will be any action

White House spokesman

Mr Arafat already appears to have taken some steps - ratifying a law establishing an independent judiciary on Tuesday night.

Israeli Prime Minister Ariel Sharon, speaking to the Israeli parliament on Tuesday, said there would be no peace talks with the Palestinians without fundamental reform of the PA.

"There can be no peace with a corrupt terror regime which is rotten and dictatorial," said Mr Sharon in his address to parliament.

But he did not rule out a Palestinian state emerging from future peace talks - an apparent rebuff to his Likud party which on Sunday voted against any statehood west of the River Jordan.

Nakba day

Observers said Mr Arafat's performance was rambling and sometimes incoherent, although he did raise his own spirits with a few off-the-cuff jokes.

Nakba demonstrations have been low key this year

While he did acknowledge his own past failings, he heaped blame for most of Palestinians' problems on Israel.

He also condemned Palestinian suicide bombings against Israeli civilians - but insisted that the Palestinian uprising would continue until Israel's occupation was ended.

The speech was delivered during muted Palestinian commemorations of al-Nakba (the "catastrophe"), as the 1948 establishment of Israel in Palestine and the birth of the Palestinian refugee crisis is known in Arabic.

In recent years, tens of thousands of Palestinians have taken to the streets for the commemorations, but Wednesday's turnout was much smaller.

"People are not interested any more in demonstrations. They are looking how to get food for their children. They are looking how to stay alive," said one Gaza resident quoted by AP.

"We are living the Nakba every day," he added.