President Bush says he sees a great chance to establish a Palestinian state, and that he intends to use the next four years to "spend the capital of the United States" on such a state.

President Bush and British Prime Minister Tony Blair met in Washington Friday, to discuss Afghanistan, Iraq and ways to revive the Middle East peace process.

The meeting came just hours after Palestinian leader Yasser Arafat's burial. Mr. Bush said a Palestinian state must live side by side with Israel, and he called on Palestinian leaders to commit themselves to fighting terrorism and to democratic reform.

Mr. Bush also said he hopes to visit Europe as soon as possible after his inauguration in January.

Prime Minister Blair said European countries have a tremendous desire and willingness to bolster trans-Atlantic relations, which were strained by the Iraq war.