W.House: Still 'long way to go' for Mideast peace

CHICAGO (Reuters) - U.S. President Barack Obama sees Israeli Prime Minister Benjamin Netanyahu's endorsement of a two-state solution to the Middle East conflict as a big step forward but acknowledges there is still a "long way to go," the White House said on Monday.

The Obama administration sought to put a positive spin on Netanyahu's speech given on Sunday in which he accepted the U.S.-backed principle of Palestinian statehood for the first time but attached a list of conditions that Palestinians have rejected.

"The Netanyahu government took a big step forward yesterday in acknowledging for the first time the need for a two-state solution," White House spokesman Robert Gibbs told reporters accompanying Obama to Chicago aboard Air Force One.

"The president believes that there's a long way to go and many twists and turns in the road to get there, but is pleased thus far with the progress that's being made, and I think yesterday's speech certainly is a big part of that."

Netanyahu endorsed the establishment of a Palestinian state on condition that Israel be given international guarantees in advance that the new nation would be demilitarized.

While Netanyahu responded to weeks of pressure from Obama over the issue of Palestinian statehood, Palestinians were disappointed by the Israeli leader's demand that they recognize Israel as a Jewish state and for his failure to halt Jewish settlement expansion in the occupied West Bank.

Obama has called for a full settlement freeze, in line with the U.S.-sponsored "road map," but Netanyahu, who heads a new right-leaning government, wants building to continue in existing Jewish enclaves.

"We're working and discussing with all involved how we can move this process forward, how we can create a two-state solution whereby Israel and the Palestinians live side by side in peace and security," Gibbs said.

"What Mr. Netanyahu said yesterday is an important part of that," he added.