A speech by Yasser Arafat condemning attacks on Israeli civilians and setting conditions for Palestinian elections has been dismissed by both Israel and Hamas.

The Palestinian leader's condemnation of attacks stopped short of calling for an end to suicide bombings and he made elections conditional on an Israeli withdrawal.

Peace and reforms can only happen when Arafat is not there

Raanan Gissin adviser to Israeli prime minister

The militant Hamas organisation said the speech to the Palestinian parliament had failed to meet expectations.

An adviser to Israeli Prime Minister Ariel Sharon said nothing would be resolved while Mr Arafat remained in office.

"Peace and reforms can only happen when Arafat is not there," said Raanan Gissin, dismissing the speech as meaningless.

The BBC's Peter Biles says that Israel will, as before, be certain to judge the Palestinians and their leader on their actions, not words.

'Democratic atmosphere'

When he appeared in his battered compound in Ramallah, it was Mr Arafat's first address to the Palestinian assembly in 18 months.

The shaky 73-year-old reaffirmed that he wanted the elections to be held, as scheduled, in January 2003.

Presidential and parliamentary elections must take place - but in a democratic atmosphere

Yasser Arafat

Parliament was due to discuss procedures for the elections in the course of the two-day session which started on Monday.

But Mr Arafat said they could only occur when Israel fully implemented a peace deal to withdraw from towns in the West Bank and Gaza Strip.

So far troops have only pulled out of the centre of Bethlehem.

"Presidential and parliamentary elections must take place - but in a democratic atmosphere," said Mr Arafat.

"Israel must lift its siege of Palestinian cities, withdraw its tanks so that our people will be able to exert their democratic rights."

Mr Arafat intends to stand for re-election and opinion polls show him the clear favourite to win.

Attacks on civilians

The Palestinian leader said he condemned attacks on Israeli citizens but accused Israel of exploiting the terrorist attacks of 11 September to cast Palestinian resistance as terrorism.

Palestinians were "firmly against all kinds of terrorism, whether it is by states, groups or individuals", he said.

Arafat: Enough of bloodshed

"We want to achieve peace with you," he said, addressing Israelis directly.

"We want security and stability for us and you and for the entire area. After 50 years of struggle, I say it is enough of the struggle and bloodshed."

However, Mr Arafat skipped passages in his prepared speech which included a call on parliament to ban suicide attacks.

A senior Hamas leader, Mahmoud al-Zahar, condemned Mr Arafat for appearing to equate casualties inflicted by "the resistance and the occupation".

He said the speech would have no impact on the ground.

Another Hamas figure, Ismail Haniya, told the French news agency AFP that Mr Arafat's political reforms amounted to "a change of faces or consolidating the institutions already in place".

Gaza violence

The session of the Palestinian parliament opened hours after Israeli forces made a new incursion into the Gaza Strip, demolishing suspected weapons workshops in refugee camps south of Gaza City.

In a separate incident, Palestinian security sources said two Palestinians were killed near Gaza's southern border with Egypt.

Israeli security sources have confirmed that troops fired on two suspicious figures approaching a security fence.