Arafat calls for overhaul of Palestinian government

Arafat has told the Palestinian leadership to prepare for elections.

RAMALLAH, West Bank (CNN) -- Pledging never to give up hope for peace or a "free and independent homeland," Palestinian leader Yasser Arafat on Wednesday called on the Palestinian Legislative Council for a complete overhaul of the government.

"I would like to call on you to re-evaluate all our administrative, ministerial and security institutions after we have seen errors here and there, errors that cannot be hidden from the public opinion," Arafat said.

Arafat's speech came one day after Israeli Prime Minister Ariel Sharon said the Palestinian Authority must undergo extensive reform and said there must be a "complete cessation of terrorism, violence and incitement" before peace negotiations can proceed.

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Arafat said the Palestinian leadership should be prepared for elections, but he gave no time frame.

"We will never give up the option of peace between us and the Israelis, because peace is a joint interest for our Palestinian people and the Israeli people as well," Arafat said.

The Palestinian leader harshly criticized the Israeli military operation, known as Operation Defensive Shield, which he said brought "worldwide condemnation."

"Our people are the only people today in the world who live under occupation," Arafat said. "Our dream is ... full independence."

Arafat's address came on the anniversary of the founding of Israel -- May 15, 1948. Palestinians uprooted on that day call it the day of "catastrophe."

Sharon -- in a speech Tuesday to the Israeli Knesset -- didn't mention the term "Palestinian state" but said he envisioned the possibility of progress between both peoples in years to come.

"There cannot be any peace with a dictatorial, corrupt and tyrannical regime. This has to be a different authority," said Sharon, who has said in the past he is not against a Palestinian state being established.

Sharon said that when the Palestinian Authority undergoes security, economic, legal and social reform, and ends terrorism, Israel "will be able to enter a staged solution involving a long-term interim arrangement with the Palestinians."

Sharon lauded Operation Defensive Shield -- the recent Israeli military operation in Palestinian-held territory -- saying it was "absolutely vital as a stage in our fight to uproot and eradicate terrorism." But he said Israel has no intention of staying in territory controlled by the Palestinian Authority.