JERUSALEM - Incoming Israeli Prime Minister Benjamin Netanyahu, seemingly softening his hard line on dealing with the Palestinians, said yesterday he would pursue peace talks with the Palestinian Authority, but withheld any endorsement of an independent Palestinian state.

"I think that the Palestinians should understand that they have in our government a partner for peace, for security, and for rapid economic development of the Palestinian economy," Netanyahu, leader of the right-wing Likud Party, told a business group.

His remarks on the peace process were his most substantial since the February Israeli elections.

But there was no mention of creating an independent state, a goal that has formed the basis of U.S. and Western-sponsored peace talks.

President Obama reaffirmed U.S. support for the goal in comments in Washington on Tuesday, calling progress toward a Palestinian state "critical" to ending an "unsustainable" situation in which Palestinians live under Israeli restrictions and Israelis worry about their security.

Netanyahu has been skeptical of the U.S.-backed peace process and has said he would prefer to focus on building the Palestinian economy in the West Bank.

But on Tuesday his government won the backing of the Labor Party, which has supported peace talks.

Netanyahu has a record of rebuffing peace moves that require Israeli concessions.

Apparently to entice Labor into his coalition Netanyahu had to promise to pursue peace, but he stopped short of pledging to work for creation of a Palestinian state - a cornerstone of peace plans for more than a decade.

Palestinians say they worry that Netanyahu's government, which in addition to Labor includes hawkish parties, will be more aggressive in West Bank settlement construction.

In the campaign before the Feb. 10 election that propelled him toward the premiership, Netanyahu disparaged talks on a peace treaty, saying the proper approach was to first build up the Palestinian economy.

Palestinian leaders rejected that, and during her visit here this month, Secretary of State Hillary Rodham Clinton at every opportunity made a point of calling for creation of a Palestinian state.

That set up a possible head-on clash between Israel and its most powerful ally, but Netanyahu insists this won't happen and yesterday put a positive face on the situation.

Peace is a "common and enduring goal for all Israelis and Israeli governments, mine included," he said.

In the West Bank, officials in the Western-backed government of Palestinian Authority president Mahmoud Abbas were skeptical. Spokesman Nabil Abu Rdeneh dismissed Netanyahu's call for economic development.

"Any solutions with other slogans and titles are only an attempt to escape the commitments of the peace process," he said.

As of now, Netanyahu has enlisted parties with 69 of the 120 seats in parliament.

Netanyahu's main rival, Foreign Minister Tzipi Livni of the Kadima Party, insisted she would stay out.

"I have no doubt that the public wouldn't want to see us buried in the government without being able to substantially influence its policies," she told Channel 2 TV, after describing the incoming team as "conceived in sin."

Rights Group Faults Israel and Hamas

Both Israel and Hamas should be investigated by the United Nations for actions that amount to war crimes, Human Rights Watch said yesterday.

It said Israel fired white phosphorous shells - which create smoke screens but can cause severe burns - indiscriminately over densely populated areas during its three-week Gaza offensive while

the Palestinian territory's Hamas rulers indiscriminately fired rockets into Israeli border towns.

The United States, which supplied the white phosphorous to Israel, also should investigate whether the shells were used illegally, the New York-based group said.

The Israeli military said yesterday that the shells were used in line with international law. "The claim that smoke

shells were used indiscriminately, or to threaten the civilian population, is baseless," the military said in a statement.

Each shell bursts into

116 burning white phosphorous wedges, over a radius of more than 135 yards. The wedges burn on contact with oxygen, creating intense heat.

- Associated Press

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This article includes information from the Associated Press.