Mr. President, Distinguished Delegates,

As the Prime Minister of Israel, I represent a state whose creation was envisioned, encouraged and advocated both by the League of Nations almost 80 years ago, and by the United Nations.

This extraordinary recognition by the international community confirmed what the Jewish people have known and felt for two millennia:

- that the bond between the People of Israel and the Land of Israel is eternal,

- and that the rebirth of the Jewish state in the Land of Israel is an historic imperative.

Religious and non-religious people alike have viewed this rebirth as a modern miracle, the realization of the vision of the Hebrew prophets.

Ever since this miracle occurred we have all been hoping that it would be accompanied by the fulfillment of another biblical prophesy:

"Nation shall not lift up sword against nation, neither shall they learn war any more."

It was in this spirit that the founders of Israel stretched the hand of peace to our neighbors in our Declaration of Independence 50 years ago.

Now, half a century later, as we view with pride our nation's extraordinary accomplishments, we are determined to complete the circle of peace around us.

No people have suffered more from war and violence than the Jewish people. No one wants peace more than we do.

I know that this is not the common perception of us. I personally am often accused of not wanting peace.

Nothing could be further from the truth. I have been on the fields of battle. I have seen my comrades fall.

I have two small children at home. I want a future free of war, a future of peace, for them and for Palestinian children like them.

We want peace for us and for the Palestinian people, whose prolonged suffering has been one of the cruel consequences of the wars waged against us.

We are willing to make painful compromises for peace. We hope the Palestinians are ready to make the necessary compromises, too.

What is at stake is our life together in a very small land. And there is no reason that we should not be able to live together.

We are, after all, the sons and daughters of Abraham.

As we search for peace, we naturally encounter crises and stalemates, frustrations and obstacles. But only negotiations can solve our problems.

An outcome which is not the result ot negotiations is an invitation to continued conflict. Negotiations accompanied by violence and threats of violence are an invitation to failure.

The option of violence must be totally discarded and permanently disavowed.

Peace will be achieved only by heeding the call made by two great leaders, the late President of Egypt Anwar Sadat and Prime Minister Menachem Begin.

21 years ago they declared in Jerusalem: "No more war. No more bloodshed."

The treaty they hammered out was an historic turning point which changed the face of our region. It has benefited both countries and brought hope to all of us.

So has the peace with Jordan, a model peace for all our neighbors.

King Hussein's contribution to this peace, his devotion to the advancement of our relationship, and his efforts to help the peace process with the Palestinians have been invaluable.

In the name of the people of Israel, and I am sure, on behalf of all of you, I want to send King Hussein the most heartfelt wishes for a quick and complete recovery.

We can achieve a successful peace agreement with the Palestinians as well.

But for that peace to endure, it must be based on two principles:

The first is security. A peace that cannot be defended will not last. This is the central lesson of the 20th century.

None of us can afford to forget this lesson, least of all the Jewish People.

As the Prime Minister of the one Jewish state, I must ensure Israel's ability to defend itself, regardless of criticism and misunderstanding by those who do not share this responsibility.

The second principle of a durable peace is reciprocity. Only agreements honored by both sides can be successful.

The agreement between Israel and the Palestinians is based on a simple equation: The Palestinians receive jurisdiction in the territory in which they live.

In return, they prevent terrorist attacks against Israel from these territories.

Israel has been fulfilling its part of this agreement. 100 % of the Palestinians in the Gaza district and 98 % of the Palestinians in Judea and Samaria, known as the West Bank, are now living under Palestinian rule.

They enjoy the attributes of self-government: their own flag, their own executive, their own judiciary and legislative bodies, and their own police force.

It can no longer be claimed that the Palestinians are occupied by Israel. We do not govern their lives.

But we cannot accept a situation in which they will threaten our lives.

This is of paramount concern to us as we approach further redeployment.

The territory we are negotiating about is virtually uninhabited by Palestinians. Yet this land is the canvas on which thousands of years of Jewish history have been etched.

And it has powerful implications for Israel's security. Remember: At its widest point Israel is all of 50 miles. And should it cede all of the West Bank, that distance would be reduced to the distance between this building and La Guardia Airport.

To part with one square inch of this land is agonizing for us. Every stone, every hill, every valley resonates with our forefathers' footsteps:

From the cradle of Jewish civilization through the biblical kings and prophets, through the sages, scholars and poets of Israel, down to our own time.

Yet in the spirit of compromise and reconciliation, we have agreed to

transfer to Palestinian jurisdiction some of this hallowed land, provided that the principles of security and reciprocity are kept.

This means that Israel would retain the ability to defend itself, and that the Palestinians will fulfill their commitments, first and foremost to shun violence and fight terrorism.

Under the Oslo and Hebron agreements, the Palestinian Authority and Chairman Arafat agreed to dismantle the terrorist infrastructures, and arrest and prosecute terrorist operatives.

They agreed to collect and dispose of illegal weapons, imprison and hand over wanted murderers, and reduce the Palestinian police to the numbers prescribed in the Oslo agreements.

They agreed to cease the vicious daily propaganda on official Palestinian television, which exhorts five-year-olds to become suicide warriors. This is education for war, not for peace.

And they agreed that they must complete the annulment of the Palestinian charter, which can only be done by the Palestinian National Council.

That charter is still on the books, still on the Internet, still calling for Israel's destruction thorough armed struggle, a euphemism for terrorism.

I say to our Palestinian partners: Choose peace! Fight for peace! You cannot talk peace and tolerate terrorism.

Terrorism endangers our peace, but it is also a global cancer. Many leaders today understand this, as President Clinton made abundantly clear in this hall.

But what makes terrorism rooted in the Middle East so pernicious is that the terrorists invoke a distorted and fanatic interpretation of Islam, which is very distant from enlightened Islam.

We have no quarrel with Islam. It is one of the world's great religions, and we have admiration and respect for its institutions and its teachings.

But fanatic Islamist terrorism is religion betrayed.

It threatens not only us. It undermines Arab governments and societies. It endangers the peace of the world.

For terrorism to be defeated, terrorists must be punished and deterred. And the climate of support they enjoy in various lands must disappear. This is the only way that terrorism will decline and ultimately be rooted out from our lives.

Mr. President,

The elimination of terrorism will undoubtedly lead to prosperity in our region.

We envision a market-based regional economy between Israel, Jordan, and the PA.

We are lifting the barriers to trade, eliminating red tape, and promoting joint business ventures between the parties.

The absence of violence will enable all of us - Palestinians, Jordanians, Egyptians, Syrians, Lebanese and Israelis - to reach a standard of living and quality of life now considered unimaginable.

Once we complete the current talks we will begin negotiations for the final settlement with the Palestinian Authority.

I urged starting these negotiations a year ago, but my offer was turned down.

Now this phase is long overdue. But as the late Yitzhak Rabin noted, no target date in the Oslo Accords was met on schedule.

This failure to meet deadlines did not put an end to the agreement.

The Oslo accords are not about meeting deadlines. Their essential purpose is to reach a peace agreement through negotiations.

An arbitrary, unilateral declaration of a Palestinian state, in disregard of this purpose, would constitute a fundamental violation of the Oslo Accords. It would cause the complete collapse of the process.

I strongly urge the Palestinian Authority not to take this course.

Such actions will inevitably prompt unilateral responses on our part.

This development will not be good for the Palestinians, not good for Israel, not good for peace.

We must continue to negotiate, earnestly and tirelessly, until a final peace agreement is reached. No other way will do.

I envision a permanent settlement based on a clear principle:

For such a peace to succeed, the Palestinians should have all the powers to govern their lives and none of the powers to threaten our lives.

They will have control of all aspects of their society, such as law, religion and education; industry, commerce and agriculture; tourism, health and welfare.

They can prosper and flourish.

What they cannot do is endanger our existence.

We have the right to ensure that the Palestinian entity does not become the base for hostile forces.

The territories we cede must not become a terrorist haven nor a base for foreign forces.

Nor can we accept the mortal threat of weapons such as anti aircraft missiles on the hills above our cities and airfields.

This is the great challenge of the permanent status negotiations:

To achieve a durable peace that will strike a balance between Palestinian self-rule and Israel's security. I repeat: This balance can only be achieved, not by unilateral declarations but by negotiations and negotiations alone.

Negotiations for peace is what we want with Lebanon and Syria as well. Over six months ago, we announced an initiative to implement Security Council resolution 425.

Israel is prepared to withdraw from southern Lebanon if security arrangements ensure the safety of the civilian population on both sides of the border.

We now find ourselves in the bizarre position of offering to withdraw from an Arab country and meeting with Arab refusal to negotiate such a withdrawal.

But we remain hopeful.

Peace with Syria and Lebanon will complete the circle of peace with our immediate neighbors.

But the achievement of a lasting peace in our region requires addressing the ominous existential dangers which still threaten Israel beyond the horizon.

Both Iran and Iraq continue their efforts to acquire non-conventional weapons and ballistic missiles with strategic reach.

Iran has just tested an intermediate range missile.

Iraq has declared that it will no longer accept international inspections of its non-conventional programs mandated by UN Security Council resolutions.

These developments threaten not only Israel, but all nations.

In the hands of the rogue regimes of the Middle East, weapons of mass destruction may pose a greater threat to world peace than anything in the past.

To let sweet talk by leaders of these regimes lull us into inaction is to repeat the worst mistakes of this century.

What is required is concerted international action to prevent disaster.

This is what this body was established to do. And if it is to live up to its founders' expectations, it will have to be far more adept at distinguishing between fanatic aggressors and their intended victims.

The U.N. can help by encouraging the reactivation of the multilateral committees conceived in the Madrid conference.

By addressing such issues as regional economic development, arms control, refugees, water and the environment, these committees can produce the building blocks of peace.

But ultimately the crucial decisions must be made by the peoples of the Middle East themselves. They must decide whether the region will continue being an arena of terrorism and war, or become a full participant in a peaceful, prosperous global economy.

Cooperation and peace can give the Middle East a leading position in the world of the next millennium. Violence, terrorism and war will assure stagnation and misery.

We know which choice we want for our children. My wife and I hope that when our two little boys grow up, the only competition they will engage in with Palestinian boys, and Egyptian and Jordanian and Syrian boys, will be on football fields and in debating societies.

It is characteristic of the Jewish people to live in hope.

It is the name of our national anthem.

It is what has made it possible for us, despite unparalleled persecution, to contribute as much as we have to human progress in the past 4000 years.

And it is reflected in the prayer we utter this week, as we celebrate the Jewish New Year. It is a wish we extend from our eternal capital Jerusalem, the city of peace, to all our neighbors and to all of you:

"May the year and its maledictions end; and a new year and its blessings begin."

Shana Tova.