European Union officials said Monday that they would delay any improvement in trade relations with Israel after Prime Minister Binyamin Netanyahu offered conditional support for a Palestinian state in an address Sunday night but did not declare a freeze on Israeli settlements.

The European leaders called Netanyahu's endorsement of Palestinian statehood a positive development, but they urged him to take more concrete steps, such as imposing a freeze on expansion of Jewish settlements in the occupied West Bank and loosening restrictions on shipments of construction material to the Gaza Strip.

Members of Netanyahu's governing coalition lauded his speech, saying he had masterfully adapted to international pressure without compromising his core principles. For the first time in his political career, Netanyahu offered to support a Palestinian state, but only if it is demilitarized and if Palestinians agree to a "public, binding and unequivocal" recognition that Israel is "the nation state of the Jewish people."

On Monday, Arab commentators attacked those conditions. Egyptian President Hosni Mubarak said Netanyahu's speech "aborts" the peace process that President Obama tried to reinvigorate with his address to Muslim nations on June 4 in Cairo. The London-based al-Hayat newspaper said Netanyahu's speech was full of "crippling conditions," and it ran an editorial cartoon showing the Israeli prime minister grinning as he swallowed the dove of peace.
Obama said on Monday that "overall, I thought there was some positive movement" in Netanyahu's speech. He acknowledged that Netanyahu placed conditions on Palestinian statehood but said, "That's exactly what negotiations are supposed to be about."

"Both sides are going to have to move," Obama added. For Israel, "that means a cessation of settlements." For the Palestinians, it means an "end to violence" against Israel.

"What we are seeing is at least the possibility we can restart serious talks," Obama said.

The European Union and Israel have been discussing an upgrade in trade ties, but the idea was shelved at the start of Israel's war with the Islamist Hamas movement in Gaza late last year. European foreign ministers, who are to meet in Luxembourg this week with Israeli Foreign Minister Avigdor Lieberman, indicated Monday that the trade benefits will not be forthcoming unless Netanyahu takes more concrete action toward peace.

French Foreign Minister Bernard Kouchner and others said they would continue urging Israel to freeze settlements and to ease trade restrictions on Gaza. Israel prohibits the shipment into Gaza of everything but specified foods, humanitarian goods and fuel.

Kouchner noted Netanyahu's shift on the issue of Palestinian statehood but said, "Peace means going well beyond that," the Associated Press reported. "The whole international community demands the immediate halt to colonization and a reopening of the Gaza border," Kouchner was quoted as saying.

Arab officials and media, meanwhile, said the Israeli leader made demands that he knew the Palestinians would not accept, while avoiding the one concrete step -- a settlement freeze -- that would have helped restart peace talks. Netanyahu has said his administration will not approve new settlements or appropriate more land but will allow "normal life" to continue in existing West Bank settler communities, which house about 300,000 people.