|PIC1|U.S. President George W. Bush assured Palestinian leader Mahmoud Abbas on Thursday that Palestinian statehood remained a high priority in his final 10 months in office despite faltering peace talks.

As Bush met with Abbas at the White House to try to shore up the negotiations, the Islamist militant group Hamas formally proposed to Egyptian mediators in Cairo a six-month truce between Israel and Palestinians in the Gaza Strip with an option to extend it to include the Israeli-occupied West Bank.

"The movement agrees to a truce in the Gaza Strip ... fixed at six months, during which period Egypt will work to extend the truce to the West Bank," former Palestinian Foreign Minister Mahmoud al-Zahar, said reading from a statement.

"The truce must be mutual and simultaneous and the blockade must be lifted and the crossing points opened, including the Rafah crossing point (between Gaza and Egypt)," Zahar, who is also a top Hamas leader, added.

Israel's U.N. ambassador said a truce would give Hamas a chance to regroup. "We do not intend to give them that time and we do not believe any truce offer that comes from Hamas is indeed trustworthy," Dan Gillerman said in New York.

Violence that has killed scores of people, mainly Palestinians, in recent months has fuelled deepening scepticism over the chances of achieving peace before Bush leaves power.

At the Washington talks, Abbas voiced confidence in Bush's commitment to an agreement that would lead to the creation of a Palestinian state but acknowledged it would not be easy.

"I cannot say the road to peace is paved with flowers. It is paved with obstacles," Abbas said, sitting next to Bush in the Oval Office.

STALLED TALKS

The talks with Abbas were a prelude to Bush's trip to Israel in mid-May to celebrate the 60th anniversary of its founding.

Bush also plans to meet Abbas again at the Egyptian resort of Sharm el-Sheikh during the Middle East trip, White House spokeswoman Dana Perino said.

"I assured the president that a Palestinian state's a high priority for me and my administration, a viable state, a state that doesn't look like Swiss cheese," Bush told reporters.

"I'm confident we can achieve the definition of a state. I'm also confident it's going to require hard work. To that end, I'm going back to the Middle East."

Negotiations between Abbas and Israeli Prime Minister Ehud Olmert have yielded little progress since Bush hosted a conference in Annapolis, Maryland, in November where the two leaders pledged to try to reach a peace deal by the end of 2008.

The U.S. administration now appears to be picking up the pace of Middle East diplomacy again after Bush failed to achieve a breakthrough on his last visit to the region in January.

Since Annapolis, the climate has been soured by the dispute over Israeli settlement expansion plans in the West Bank and by violence in and around Gaza, where Hamas cross-border rocket fire has drawn a tough Israeli military response.

Abbas wants Bush to press Israel to stop expanding its enclaves in the occupied West Bank but neither leader spoke publicly after meeting on Thursday about the Jewish settlements Palestinians see as a way of denying them contiguous territory.

Israel insists it has the right to build in major settlements it intends to keep under any future peace treaty.

Secretary of State Condoleezza Rice is going to the region next month before Bush, who is looking to shape a foreign policy legacy that encompasses more than the unpopular war in Iraq.

"The Palestinians and the Israelis have made halting progress," Perino acknowledged earlier, saying the administration was looking for ways to "reinvigorate their communication with one another".

But Bush will likely have a hard time squeezing serious concessions from either side as world leaders look increasingly to whomever will succeed him in January 2009.

TRUCE CONDITIONS

Speaking after meeting Egyptian intelligence chief Omar Suleiman in Cairo, Hamas' Zahar said the truce must include an end to the Israeli blockade of the coastal strip.

Suleiman, Egypt's main contact with Hamas and Israel, had agreed to call Palestinian factions to Egypt to discuss the offer and ensure Palestinian consensus, Zahar said.

"It was agreed with Minister Suleiman to invite the Palestinian factions next Tuesday and Wednesday to discuss the paper presented by our side," Zahar said.

Israel tightened a blockade on the Gaza Strip after Hamas seized control of the territory from Abbas' Fatah group last June.

A U.N. humanitarian agency on Thursday suspended its aid operations to hundreds of thousands of Palestinians in the Gaza Strip over lack of fuel supplies that had been restricted by Israel.

A shipment of fuel destined for the United Nations and Relief Agency was blocked by Palestinian farmers angry that they had been deprived of fuel.