EU gives cautious welcome to Netanyahu speech

Israel's Prime Minister Benjamin Netanyahu attends a session of the Knesset, the Israeli parliament, in Jerusalem May 25, 2009.

LUXEMBOURG (Reuters) - The European Union on Monday cautiously welcomed Israeli Prime Minister Benjamin Netanyahu's endorsement -- albeit with conditions -- for a Palestinian state, but Finland said it was not enough to upgrade ties.

"In my view, this is a step in the right direction. The acceptance of a Palestinian state was present there," Czech Foreign Minister Jan Kohout, whose country holds the EU's rotating six-month presidency, told reporters.

Foreign Minister Carl Bildt of Sweden, which will take over the EU presidency in July, called it "a small step forward".

"That's good but it's only a first step," he said ahead of a meeting of EU foreign ministers in Luxembourg. "A state can't be defined as anything...the fact that he uttered the word is a small first step."

Finnish Foreign Minister Alexander Stubb, when asked if Netanyahu's move was sufficient for the EU to upgrade ties with Israel, said: "No".

The 27-nation European Union has linked an unfreezing of plans to upgrade links with Israel to Netanyahu committing to negotiate a two-state accord. Officials of the bloc were due to meet Israeli Foreign Minister Avigdor Lieberman in Luxembourg later on Monday.

In a statement, French Foreign Minister Bernard Kouchner also called Netanyahu's speech a step forward.

"But to secure peace means going well beyond that, without laying down any pre-conditions to negotiations," he said.

Kouchner said the two sides should define the outlines of a new state and tackle all the major issues, including the final status of Jerusalem and the question of refugees.

He said an atmosphere of trust needed to be restored between the two sides. "In this respect, France, along with its European partners, the United States and the whole international community, demands the immediate halt to colonisation and a reopening of the Gaza border," he said.

Netanyahu, who has refused to back a state for Palestinians since taking office in March, said on Sunday he would endorse establishment of a such a Palestinian state -- but only if Israel received in advance international guarantees the new nation would have no army and Palestinians recognised Israel as a Jewish state.

And his defence of Jewish settlement on occupied land may fail to dispel tensions with critics.

U.S. President Barack Obama called Netanyahu's shift on Palestinian statehood an "important step forward" but aides to Palestinian President Mahmoud Abbas denounced the speech as "sabotaging" negotiations by restating Israel's refusal to share the city of Jerusalem or accept Palestinian refugees.