President Bush is pushing his Middle East peace plan at the G-8 summit in Canada. Mr. Bush is standing by his call for a leadership change at the top of the Palestinian Authority.
President Bush is not backing down from his demand for new Palestinian leadership as a condition for even provisional statehood.
The Palestinian Authority has announced plans for elections in January. Mr. Bush was asked what he will do if Yasser Arafat is re-elected.
"I meant what I said, that there needs to be change. If people are interested in peace something else has got to happen. We are now mired in a situation now where there is terror on the one hand and hopelessness on the other and that is unacceptable," he said.
Speaking at the start of a meeting with British Prime Minister Tony Blair, Mr. Bush added to the pressure by linking Palestinian reforms to aid.
"Listen, I can assure you we won't be putting money into a society which is not transparent, and corrupt. And I suspect other countries won't either," he said.
A senior administration official later told reporters that Mr. Bush was not referring to humanitarian assistance, but to other types of future aid. The official also said that Mr. Bush's plan is getting a good response from some G-8 leaders.
But overall they are not enthusiastic about his calls for the ouster of Yasser Arafat. The most positive response came from Prime Minister Blair. He agreed on the need for change, but said other countries cannot dictate the outcome of the Palestinian elections.
"It is for the Palestinians to elect the people they choose to elect. But if we are going to make progress we need people we can negotiate with, who are serious about negotiating around the issues of security and political reform necessary for the peace process to work," he said.
Administration officials indicate they were heartened by his words, saying everyone understands that something needs to change in the middle east. White House Spokesman Ari Fleischer said President Bush believes that change should start at the top of the Palestinian Authority.
"I think the president has given up hope that Yasser Arafat can be the one to implement reform," he said.
Mr. Fleischer said other democratic actions are also required, including the creation of an independent Palestinian legislature. He drew a comparison with Israel, saying the Israelis have a functioning democracy, but the Palestinians do not.