By Agencies

Barack Obama, the US president, has argued for reforms in the Middle East and North Africa during a key speech in Washington.

On the issue of Palestine, Obama said: "The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognised borders are established for both states.

"The Palestinian people must have the right to govern themselves, and reach their potential, in a sovereign and contiguous state. 

"As for security, every state has the right to self-defence, and Israel must be able to defend itself – by itself – against any threat."

Israeli reaction

Reacting to the address shortly afterwards, Binyamin Netanyahu, the Israeli prime minister, said a Palestinian state should not be established at the "expense of Israeli existence". He appreciated the US president's address but rejected any withdrawal to "indefensible" 1967 borders.

Obama's speech came a day ahead of a visit to Washington by Netanyahu.

On Thursday, the Israeli interior ministry requested and received the approval of Netanyahu's office ahead of his US visit to begin holding hearings on an additional 1,550 housing units in the settlements of Har Homa and Pisgat Ze'ev, both located beyond the 1967 borders.

Obama must take "concrete steps" not issue "slogans," the Palestinian Hamas movement said on Thursday following the president's speech.

Hamas response

"What Obama needs to do is not to add slogans but to take concrete steps to protect the rights of the Palestinian people and the Arab nation," said Sami Abu Zuhri, a Hamas spokesman.

During his address to the US state department on Thursday, Obama said Bashar al-Assad, the Syrian president, must either lead his country through a democratic transition or "get out of the way".

Obama said Syria's brutal crackdown on pro-reform activists was unacceptable.

He said Assad could no longer rule through repression and must change course if he wants international acceptance.

More than 850 people are believed to have been killed in two months of unrest in Syria.

Obama's speech came a day after he imposed sanctions on Assad and six other officials for human rights abuses during the crackdown.

The president said two leaders in the region had stepped down and that more may follow. The president also said the future of the US was bound to the region.

Iran 'meddling'

Turning to Bahrain and Yemen, Obama said: "We must acknowledge that our friends in the region have not all reacted to the demands for change consistent with the principles that I have outlined today.

"That is true in Yemen, where President [Ali Abdullah] Saleh needs to follow through on his commitment to transfer power. And that is true, today, in Bahrain.

"We have insisted publically and privately that mass arrests and brute force are at odds with the universal rights of Bahrain's citizens, and will not make legitimate calls for reform go away.

"The only way forward is for the government and opposition to engage in a dialogue, and you can't have a real dialogue when parts of the peaceful opposition are in jail.

"The government must create the conditions for dialogue, and the opposition must participate to forge a just future for all Bahrainis."

The president also said that Iran had "tried to take advantage of the turmoil there".

Economic investment

Addressing the death of Osama bin Laden, the president said the al-Qaeda leader was a mass murderer, not a martyr, whose ideas were being rejected even before he was killed.

Turning to Libya, he said: "In Libya, we saw the prospect of imminent massacre, had a mandate for action, and heard the Libyan people’s call for help.

"Had we not acted along with our NATO allies and regional coalition partners, thousands would have been killed."

Obama also laid out a major economic initiative in the Middle East to encourage democratic change in the region, beginning with Tunisia and Libya.

The president said the Overseas Private Investment Corporation, a US government agency, "will soon launch a $2bn facility to support private investment across the region". 

"And we will work with allies to refocus the European Bank for Reconstruction and Development so that it provides the same support for democratic transitions and economic modernisation in the Middle East and North Africa as it has in Europe," he said,