President George Bush lavished anniversary praise on Israel yesterday, as Palestinians commemorated the "Nakba" or "catastrophe" when 700,000 were forced from or fled their homes 60 years ago.

In a special address to the Israeli Knesset, Mr Bush declared that the US was proud to be the "closest ally and best friend in the world" of a nation that was a "homeland for the chosen people" and had "worked tirelessly for peace and... fought valiantly for freedom."

And in a speech that linked together Hamas, Hizbollah and al-Qa'ida, the President likened those – including "good and decent" people – who urged negotiations with "terrorists and radicals", with supporters of appeasing the Nazis before the Second World War.

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On Iran, Mr Bush said that permitting "the world's leading sponsor of terror" to possess "the world's deadliest weapon" would be "an unforgiveable betrayal of future generations".

Mr Bush's speech was notable for only one reference to Palestinian aspirations for a state. He did not allude to the current negotiations between the Israeli Prime Minister, Ehud Olmert, and the Palestinian President, Mahmoud Abbas, on the outlines of two-state solution that he himself helped to kick-start at the Annapolis conference last year.

Instead, his only mention was in a passage envisaging Israel's 120th anniversary – 60 years hence – in which Palestinians would have "the homeland they have long dreamed of and deserved – a democratic state that is governed by law." By that time, he prophesied, the Middle East would consist of "free and independent societies", and Hamas, Hizbollah and al-Qa'ida would have been defeated "as Muslims across the region recognise the emptiness of the terrorists' vision and the injustice of their cause".

Nor did Mr Bush make even an oblique reference to the fact that he was delivering his speech on the day that Palestinians annually commemorate the "Nakba" in the 1948 war that left a victorious Israel in control of 78 per cent of mandatory Palestine.

As sirens sounded and thousands of black balloons were released across the West Bank, several thousand Palestinians gathered in Ramallah's main Manara Square to hear a taped address by Mr Abbas urging reconciliation and an end to Israeli settlement building in the West Bank to facilitate negotiations on a future state. "Sixty years have passed," he said. "It's time to end the Nakba for the Palestinian people."

But a Nakba day message from Hamas, which controls Gaza, called on Palestinians to continue "resistance" and urged the Palestinian President to "abandon the illusion of negotiations."

At least one Palestinian youth was injured in Gaza after several dozen teenagers broke away at the end of a Hamas-organised protest near the northern Erez crossing. As youths threw stones, Israeli forces fired live rounds and tear gas.

Three Arab Knesset members were led away before the President's speech by security guards after unfurling a banner saying "We shall overcome."

Mr Bush repeated the symbolic oath traditionally uttered by Israeli soldiers at Masada, the fortress where 960 Jews in the first century rebellion against Roman rule committed suicide rather than surrender, and which he had visited yesterday: "Masada shall never fall again". He added to a standing ovation: "And America will be at your side."

But his speech did not mention the occupation of Palestinian territory since the 1967 war or restate US and international stances critical of Israel – such as demands for settlement outposts to be removed or for expansion of settlements to be halted. Nor did he mention that those calling for some engagement with Hamas include some former Israeli military and intelligence figures.

Mr Olmert told parliamentarians that he was confident that a peace agreement would "be approved in the Knesset by a large majority and... supported by the vast majority of the Israeli public".

* Reuters news agency renewed its demand yesterday for a prompt explanation of why the Israeli military in Gaza fired on one of its cameramen, Fadel Shana, who was killed a month ago today.