Palestinian and Arab leaders tried to put a brave face on George Bush's Middle East policy statement. They are fooling no one, writes Graham Usher from Jerusalem After weeks of anticipation, on 24 June George Bush finally made his policy statement on the Middle East conflict. By common assent it amounted to a colossal endorsement of Ariel Sharon's prescriptions for the new, post-11 September regional dispensation and a knock-out blow of everyone else's -- Palestinian, Arab and, indeed, European. Not that this could be gleaned from their initial responses, so desperate are Palestinian, Arab and European leaders to divine American gold in a policy made of lead The official Palestinian reaction was upbeat. "President Arafat and the Palestinian leadership have welcomed the ideas presented by President Bush... as a serious contribution to pushing the peace process forward," came the statement from Arafat's besieged headquarters in Ramallah. European Union foreign and security chief, Javier Solana, also welcomed the "renewed engagement" by America. As for Arafat, "the elected [Palestinian] leaders are the elected leaders and we will continue to deal with them," said Solana on Tuesday. Needless to say, the view of ordinary Palestinians -- across all factions and throughout the occupied territories -- was hostile, and for the same reasons as the Israeli right wing was jubilant. Bush's statement means "the end of the Arafat era and the victory of the Israeli position", said Israeli Minister Danny Neveh. It did and was, and for three reasons. First the US president unreservedly accepted Sharon's edict that any political process should now not only be predicated on the "fight against terrorists and dismantling of their infrastructure", it also requires the root-and-branch "regime- change" of the Palestinian Authority. Nor should reform mean "cosmetic change or a veiled attempt to preserve the status quo", he added, in a clear swipe at Yasser Arafat's recent cabinet reshuffle and "amalgamation" of the PA's security forces. "True reform will require entirely new political and economic institutions based on democracy, market economics and action against terrorism". Second, there was not even the whiff of a timetable for ending the longest military occupation in modern history, the insistent demand of recent Palestinian, Arab and European envoys to the White House. On the contrary, there will be "American support for the creation of a provisional state of Palestine" only "if the Palestinians embrace democracy, confront corruption and firmly reject terror". Once these occur to America and Israel's satisfaction, "work toward a final status agreement... could be reached within three years from now", resolving "questions concerning Jerusalem, the plight and future of the Palestinian refugees, a final peace between Israel and Lebanon and a Syria that supports peace and fights terror". Finally -- and under Israel's clear prodding -- Bush omitted any mention of an international peace conference this summer or the Arab initiative of the March Arab summit offering Israel a complete peace in return for Israeli withdrawal to its pre-1967 lines. Instead "the Israeli occupation that began in 1967 will be ended through a settlement negotiated between the parties, based on UN resolutions 242 and 338, with Israeli withdrawal to secure and recognised borders." It is a matter of record that Sharon views the 1967 lines as "suicidal" to the existence of the Jewish state. It appears now as a matter of fact that the US administration agrees with that interpretation. Faced with this diplomatic debacle -- and consigned again to oblivion -- Arafat decided to fight reform with reform, issuing decrees on Monday for new Palestinian parliamentary and presidential elections in January 2003 and local government ones for March. As for the prospect of his early retirement, "this is what my people will decide. They are the only ones who can determine this," he told reporters in Ramallah on Tuesday. Yesterday, Palestinian Cabinet Minister Saeb Erekat announced that Arafat had given the order for presidential and legislative balloting some time between 10 and 20 January and had also pledged an overhaul of security services, finances and courts within two to three months. He added that municipal elections would also be held in March next year. However, Erekat said it would be difficult to carry out elections and promised reforms if Israeli troops remained in place. Absent of any serious challenger, Arafat is aware his people will again elect him leader, since nothing rallies them to his side more than a combined Israeli- American foray to remove him. But that is not the issue. The issue -- with the Israeli army sitting in seven of the eight Palestinian West Bank cities and with Bush's carte blanche for it to stay there -- is whether, come next year, there will be a Palestinian Authority to lead.