After 14 days of intensive negotiations between Israelis and Palestinians, I have concluded with regret that they will not be able to reach an agreement at this time. As I explained on the eve of the summit, success was far from guaranteed--given the historical, religious, political and emotional dimensions of the conflict.

Still, because the parties were not making progress on their own and the September deadline they set for themselves was fast approaching, I thought we had no choice. We can't afford to leave a single stone unturned in the search for a just, lasting and comprehensive peace.

Now, at Camp David, both sides engaged in comprehensive discussions that were really unprecedented because they dealt with the most sensitive issues dividing them; profound and complex questions that long had been considered off limits.

Under the operating rules that nothing is agreed until everything is agreed, they are, of course, not bound by any proposal discussed at the summit. However, while we did not get an agreement here, significant progress was made on the core issues. I want to express my appreciation to Prime Minister Barak, Chairman Arafat and their delegations for the efforts they undertook to reach an agreement.

Prime Minister Barak showed particular courage vision, and an understanding of the historical importance of this moment. Chairman Arafat made it clear that he, too, remains committed to the path of peace. The trilateral statement we issued affirms both leaders' commitment to avoid violence or unilateral actions which will make peace more difficult and to keep the peace process going until it reaches a successful conclusion.

At the end of this summit, I am fully aware of the deep disappointment that will be felt on both sides. But it was essential for Israelis and Palestinians, finally, to begin to deal with the toughest decisions in the peace process. Only they can make those decisions, and they both pledged to make them, I say again, by mid-September.

Now, it's essential that they not lose hope, that they keep working for peace, they avoid any unilateral actions that would only make the hard task ahead more difficult. The statement the leaders have made today is encouraging in that regard.

Israelis and Palestinians are destined to live side by side, destined to have a common future. They have to decide what kind of future it will be. Though the differences that remain are deep, they have come a long way in the last seven years, and, notwithstanding the failure to reach an agreement, they made real headway in the last two weeks.

Now, the two parties must go home and reflect, both on what happened at Camp David and on what did not happen. For the sake of their children, they must rededicate themselves to the path of peace and find a way to resume their negotiations in the next few weeks. They've asked us to continue to help, and as always, we'll do our best. But the parties themselves, both of them, must be prepared to resolve profound questions of history, identity and national faith--as well as the future of sites that are holy to religious people all over the world who are part of the Islamic, Christian and Judaic traditions.

The children of Abraham, the descendants of Isaac and Ishmael can only be reconciled through courageous compromise. In the spirit of those who have already given their lives for peace and all Israelis, Palestinians, friends of peace in the Middle East and across the world, we long for peace and deserve a Holy Land that lives for the values of Judaism, Islam and Christianity.

Thank you.

Question: Was Jerusalem--Mr. President, was Jerusalem the main stumbling block? And where do you go from here?

The President: It was the most difficult problem. And I must tell you that we tried a lot of different approaches to it, and we have not yet found a solution. But the good news is that there is not a great deal of disagreement--and I want to emphasize this--it seemed to me, anyway, there was not a great deal of disagreement in many of these areas about what the facts on the ground would be after an agreement were made--that is, how people would live.

For example, everyone conceded that Jerusalem is a place that required everyone to have access to the holy sites and the kinds of things you've heard, and lot of other things in terms of how, operationally, the Israelis and the Palestinians have worked together; there was actually more agreement than I had thought there would be.

But obviously, the questions around Jerusalem go to the core identity of both the Palestinians and the Israelis. There were some very, as I said--it has been reported Prime Minister Barak took some very bold decisions, but we were in the end unable to bridge the gaps. I think there will be a bridge, because I think the alternative is unthinkable.

Question: There is a striking contrast between the way you described Prime Minister Barak's courageous and visionary approach to this, and Mr. Arafat seemed to be still committed to the path of peace. It sounds like that at the end of the day, Prime Minister Barak was ready to really step up to something that President Arafat wasn't yet ready to step up to.

The President: Let me be more explicit. I will say again: We made progress on all of the core issues. We made really significant progress on many of them. The Palestinian teams worked hard on a lot of these areas. But I think it is fair to say that at this moment in time, maybe because they had been preparing for it longer, maybe because they had thought through it more, that the Prime Minister moved forward more from his initial position than Chairman Arafat, on--particularly surrounding the questions of Jerusalem.

Now, these are hard questions. And as I said to both of them, none of us, no outsider can judge for another person what is at the core of his being, at the core of his sense of national essence. But we cannot make an agreement here without a continuing effort of both sides to compromise.

I do believe that--let me say this--and you will appreciate this, Tom, because you've been covering this a long time--but I want to give credit to both sides in the sense that they were really coming to grips with things they had never seriously come to grips with before.

Oh, yes, there were always side papers--even going back to 1993--about how these final issues would be solved. There were always speculation, there were always the odd conversation between Palestinians and Israelis who were friends and part of the various--the different government operations. But these folks really never had to come together before, and in an official setting put themselves on the line. And it is profoundly difficult.

So I said what I said, and my remarks should stand for themselves, because not so much as a criticism of Chairman Arafat, because this is really hard and never been done before, but in praise of Barak. He came there knowing that he was going to have to take bold steps, and he did it. And I think you should look at it more as a positive toward him than as a condemnation of the Palestinian side.

This is agonizing for them--both of them. And unless you have lived there and lived with them and talked to them, or lived with this problem a long time, it is hard to appreciate it. But I do think--I stand by the statement as written. I think they both remain committed to peace, I think they will both find a way to get there if they don't let time run away with them so that external events rob them of their options. And that's why I decided to call the summit in the first place.

I got worried that--this is like going to the dentist without having your gums deadened, you know. I mean, this is not easy. And I got worried that if we didn't do the summit and we didn't force a process to begin, which would require people to come to grips with this in a disciplined, organized way, as well as to face--look themselves in the mirror and look into the abyss and think: What can I do and what can't I do, that we would never get there. Now, I believe because of the work that was done within both teams and what they did with each other, we can still do it. Let me just make one other observation and then I'll answer your question.

You know, when we worked, I remember when we went to Dayton over Bosnia; when we went to Paris over Bosnia. After the Kosovo conflict--and I went there and met with all the people who were going to have to work on Kosovo's future--even when we first started the Irish peace talks, we were dealing with people who would hardly speak to each other. We were dealing with people who still often wouldn't shake hands. We were dealing with people who thought they were from another planet from one another, whose wounds were open.

Let me give you some good news. Of all the peace groups I ever worked with, these people know each other, they know the names of each other's children, they know how many grandchildren the grandparents have, they know their life stories, they have a genuine respect and understanding for each other. It is truly extraordinary and unique in my experience in almost eight years of dealing with it.

So I'm not trying to put a funny gloss on this; they couldn't get there. That's the truth. They couldn't get there. But this was the first time in an organized, disciplined way they had to work through, both for themselves and then with each other how they were going to come to grips with issues that go to the core of their identity.

And I think on balance, it was very much the right thing to do, and it increases the chance of a successful agreement, and it increases the chances of avoiding a disaster.

Now, I promised you, you could ask now.

Question: What is your assessment of whether Arafat's going to go through with the threat to declare statehood unilaterally? Did you get any sort of sense on whether he's going to go through with that? Did you have any--

The President: Well, let me say this. One of the reasons that I wanted to have this summit is that they're both under--will be under conflicting pressures as we go forward. One of the things that often happens in a very difficult peace process is that people, if they're not careful, will gravitate to the intense position rather than the position that will make peace. And it's very often that people know that a superficially safe position is to say no, that you won't get in trouble with whoever is dominating the debate back home wherever your home is, as long as you say no.

One of the reasons I called this summit is so that we could set in motion a process that would give the Palestinians the confidence that all of us--and most of all, the Israelis--really didn't want to make peace, so that it would offset the pressure that will be increasingly on Chairman Arafat as we approach the September 13th deadline.

Question: Are you implying that he should give up his claim to East Jerusalem--the Palestinians should?

The President: No, I didn't say that.

Question: Or any kind of a foothold?

The President: I didn't say that. I didn't say that. I didn't say that. And let me say, I presume, I am bound--I'm going to honor my promise not to leak about what they talked about, but I presume it will come out. No, I didn't say that. I said only this: I said--I will say again--the Palestinians changed their position; the moved forward. The Israelis moved more from the position they had. I said what I said; I will say again: I was not condemning Arafat, I was praising Barak. But I would be making a mistake not to praise Barak because I think he took a big risk. And I think it sparked, already, in Israel a real debate, which is moving Israeli public opinion toward the conditions that will make peace. So I thought that was important, and I think it deserves to be acknowledged.

But the overriding thing you need to know is that progress was made on all fronts, that significant progress was made on some of the core issues, that Jerusalem, as you all knew it would be, remains the biggest problem for the reasons you know.

But what we have to find here, if there is going to be an agreement--by definition, an agreement is one in which everybody is a little disappointed and nobody is defeated, in which neither side requires the other to say they have lost everything and they find a way to--a shared result.

And there's no place in the world like Jerusalem. There is no other place in the world like Jerusalem, which is basically at the core of the identity of all three monotheistic religions in the world, at the core of the identity of what it means to be a Palestinian, at the core of the identity of what it means to be an Israeli. There is no other place like this in the world. So they have to find a way to work through this.

And it shouldn't surprise you that when they first come to grips with this in an official, disciplined way where somebody has to actually say something instead of sort of be off in a corner having a conversation over a cup of coffee that no one ever--that has no--it just vanishes into air, that it's hard for them to do.

Question: But did they make enough progress, sir, to now go back home, check with their people, and possibly come back during your administration--next month or in September--to come back to Camp David and try again?

The President: I don't know if they need to come back to Camp David. I think that it rained up there so much, I'm not sure I'll ever get them back there. (Laughter.) But I think if you asked me did they make enough progress to get this done? Yes. But they've got to go home and check; they've got to feel around. And what I want to say to you is, the reason I tried to keep them there so long--and I feel much better about this than I did when we almost lost it before--and you remember, and I got them and we all agreed to stay--I didn't feel that night like I feel today.

Today, I feel that we have the elements here to keep this process going. But it's important that the people whose--both leaders represent, support their continuing involvement in this and stick with them, and understand that this is a script that's never been written before. They have to write a script and they've got to keep working at it.

But, yes, I think it can happen--

Question: During your administration?

The President: Yes. Not because it's my administration, that's irrelevant. They're operating on their timetable, not mine. It has nothing to do with the fact that it's my administration. I think it can happen because they set for themselves a September 13th deadline. And if they go past it, every day they go past it will put more pressure on the Palestinians to declare a Palestinian state unilaterally and more pressure on the Israelis to have some greater edge in conflict in their relations as a result of that.

Neither one of them want that; so I think they will find a way to keep this going. And the only relevance of my being here is that I've been working with them for eight years, and I think they both trust us and believe that Secretary Albright and Dennis and Sandy and our whole team, that we will heave to, to make peace.

Question: But, Mr. President, the Prime Minister came here in quite a precarious position to begin with back home. And some of the things you call bold and courageous, his critics back home have called treason. Can he go home, and do you believe he will have the political stability to come back at this, and did he voice any concerns to you about that?

The President: First of all, this is not a weak man. It's not for nothing that he's the most decorated soldier in the history of Israel. He didn't come over here to play safe with his political future; he came over here to do what he thought was right for the people of Israel, and I think that he--he knows that he would never do anything to put the security of Israel at risk, and that the only long-term guarantee of Israel's security is a constructive peace that's fair with her neighbors--all of them--starting with the Palestinians.

So I think the people of Israel should be very proud of him. He did nothing to compromise Israel's security, and he did everything he possibly could within the limits that he thought he had, all the kinds of constraints that operate on people in these circumstances to reach a just peace. So I would hope the people of Israel will support him, and let this thing percolate, not overreact, and say keep trying.

I want the people on both sides to tell their leaders to keep trying--to keep trying. You know, that's the only real answer here is just to bear down and go on.

Question: Mr. President, couldn't you have gotten a partial agreement and left Jerusalem for later? Was that a possibility at all?

The President: That possibility was explored and rejected.

Question: Why?

The President: I can't talk about it. If they want to talk about it, that's their business; but I can't.

Question: Have you done all you can do, sir, or would you be making more proposals?

The President: Oh, I think--well, first of all, we all agreed to reassess here. So the first thing we're going do to is, we're going to let each side go home and try to get a little sleep. I mean, we've all been sort of--we're kind of--nobody knows what time it is, I don't think, on either team.

Last night, we quit at 3:00 a.m.; the night before, we went all night long. And so, we've been working very hard at this. So what I'm going to do is let them take a deep breath and then our side, Madeleine and Sandy and all of our team and I--Dennis, we'll try to think what we think we ought to do, then we'll ask them what they want to do, and then we'll figure out what we're going to do.

We don't have a lot of time, and I wouldn't rule out the possibility that all of us will be coming up with new ideas here. I wouldn't rule anything out. The clock is still working against us. The bad news is, we don't have a deal. The good news is, they are fully and completely and comprehensively engaged in an official way for the first time on these fundamental issues.

Keep in mind: When the Oslo Agreement was drafted, these things were put down as final status issues because the people that drafted them knew it would be hard. And they took a gamble. And their gamble was that if the Israelis and the Palestinians worked together over a seven-year period and they began to share security cooperation, for example, they began to--we had some land transfers and we saw how they would work in a different geographical way, and if they kept making other specific agreements, that by the time we got to the end of the road, there would be enough knowledge and trust and understanding of each other's positions that these huge, epochal issues could be resolved.

Now, we started the process and we've got to finish. And so, and again, I say, the thing I hope most of all is that the people in the Middle East will appreciate the fact that a lot was done here and we'll support their leaders in coming back and finishing the job. The venue is not important; the mechanisms aren't important. But we know what the state of play is now and if we'll keep at it, I still think we can get it done.

Question: Can you describe what type of U.S. role was discussed in sealing the agreement financially and otherwise?

The President: Let me say, first of all, anything that would require our participation, other than financial, was not finalized. But there were a lot of ideas floated around. None of it amounted to large numbers of people. But they were potentially significant in terms of the psychology of the situation. But there was no decision made about that.

On the money, basically, you know, I think that the United States should be prepared to make a significant contribution to resolving the refugee problem. You've got refugees that have to be resettled, you've got some compensation which has to be given, and there are lots of issues in that refugee pot that cost money, and then there's the whole question of working out the economic future of the Palestinians and the whole question of working out what the security relationships will be and the security needs will be for Israel and in this new partnership that they will have--the Palestinians. How is that going to work and what should we do.

I also, when I went to the G-8, I gave a briefing to the G-8, and I asked the people who were there to help pay, too. I said, you know, this is going to have to be a worldwide financial responsibility, but because of the United States' historic involvement, which goes back many decades in the Middle East, we were the first country under President Truman to recognize Israel, we've had Republicans and Democrats alike up to their ears in the Middle East peace process for a long time, and because we have such a lot of strategic interest over there, if there could be an agreement, I think we ought to lead the way in financial contributions, but the others who are able to do so should play their part as well.

Thank you.

END 12:30 P.M. EDT