Bush: Mideast Peace by Year's End

Jan. 10, 2008— -- Everywhere President Bush went today, from an emotional tour of the birthplace of Jesus in Bethlehem to a visit to Jerusalem, he exuded remarkable confidence, boldly predicting that a peace agreement between Israel and the Palestinians is near.

"It should happen and could happen by the end of the year," Bush said.

In an interview with ABC News, Palestinian President Mahmoud Abbas agreed with Bush, calling this "an historical opportunity."

But there are other indications -- from protests in the streets of the West Bank to the continuing expansion of the Israeli settlements -- that the process will not be simple.

Bush said that all expansion of the Israeli settlements must stop, but Israel is continuing with plans to enlarge a settlement in East Jerusalem.

He said that Palestinian leaders must put an end to millitants' attacks on Israelis from Palestinian territory, but Abbas does not have control of the Gaza strip, where Palestinians have been firing rockets into the small Israeli town of Sderot.

Sderot has grown accustomed to the violence. Since 2000, some 5,000 rockets and mortars have been launched, more than twenty in the past week, and one during the hour of that we visited the town.

Gaza, which is controlled by Hamas militants, is cut off from the rest of the Palestinian territory. And this raises questions about Bush's vision of a Palestinian state with contiguous borders.

"Swiss cheese isn't going to work when it comes to the outline of a state," Bush said, referring to Gaza.

"Gaza's a tough situation. I don't know whether you can solve it in a year or not," Bush said later. "I'm convinced his government will yield a hopeful future. And the best way to make that abundantly clear is for there to be a vision that's understandable."

Special Middle East Envoy Tony Blair told ABC News in an exclusive interview that a Palestinian state is a "very real" determination.