Referring to the 2003 internationally drafted roadmap and a 2002 Arab peace plan offering normalisation in exchange for Israel returning occupied Arab land, he said: "We have clear bases for a just and comprehensive peace."

The roadmap, adopted by world powers in 2003, requires a complete freeze of all settlement activity on occupied Palestinian land, including natural growth, and the dismantling of all settlements built after March 2001.

Settlement activity

The White House has repeatedly demanded that Israel halt all settlement activity in the West Bank in order to re-launch peace talks with the Palestinians, who have refused to meet Netanyahu without a complete freeze.

Netanyahu has said his government will not allow new settlements to be built but that the "natural growth" of existing settlements will continue.

Peres, whose role as president is largely ceremonial, echoed Netanyahu's position that Israel would remain a Jewish state.

"The solution is one of two states. A Palestinian people on one hand, an Israeli people on the other. Israel will be a Jewish state and the Palestinians will have an Arab state, and discussions on that matter have ended," he said.

"Israel has no intention to control the Palestinian people, to create more settlements, to confiscate more land."

"We must overcome all difficulties and undertake a real political march for a new Middle East in which no country controls another. We move forward in the interest of all parties and our children in the future."

Captured soldier's fate

Addressing the question of the Israeli soldier captured by Gaza-based fighters more than three years ago, Mubarak said Corporal Gilad Shalit was in good health and that he hoped that Shalit would soon be freed.

"I hope the issue will end soon," Mubarak said.

Shalit was captured by fighters from Hamas and two smaller groups who had tunnelled out of Gaza on June 25, 2006, and attacked an army post, killing two other soldiers.

Shalit is believed to be held somewhere inside the Gaza Strip,  which has been run by Hamas since the group seized power in the Palestinian enclave two years ago.

Israel and Hamas have held months of indirect talks through Egyptian mediators on a prisoner swap that would see hundreds of Palestinian detainees set free in exchange for Shalit, but no deal has been struck.