Palestinian President Yasser Arafat on Saturday called on his people to terrorize their enemy, as he bitterly marked the founding of Israel 56 years ago. Thousands of Palestinians took part in demonstrations across the West Bank and Gaza Strip for the anniversary, which they call the Nakba - meaning the catastrophe.

A defiant Mr. Arafat delivered a fiery speech against Israel from his headquarters in the West Bank city of Ramallah.

Mr. Arafat called on his people to be steadfast in their struggle against Israel.

Quoting from the Muslim holy book, the Koran, he told his supporters to "find what strength you have to terrorize your enemy and the enemy of God."

Mr. Arafat said that the international community had no right to allow the establishment of a Jewish State in 1948, and the Palestinian people were determined to press on with their claim for an independent country of their own.

He said that millions of Palestinians had become refugees following the birth of Israel and they still carried the dream of returning to their former homes.

His speech came as thousands of Palestinians in the West Bank and Gaza Strip carried banners with the names of villages, which have now become part of Israel.

The Palestinian president has long been accused by Israel of sponsoring terrorism, and has been confined by Israeli forces to his Ramallah compound for more than two years.

The Cabinet of Israeli Prime Minister Ariel Sharon has vowed to remove Mr. Arafat, but has refused to say when or how it will carry out such a plan.

Mr. Sharon said earlier this year he is no longer bound to a promise he made to President Bush not to harm Mr. Arafat physically.

Mr. Bush and Mr. Sharon have cut off all direct contacts with Mr. Arafat, but their governments continue to hold discussions with other senior officials in the Palestinian Authority.