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President Bush's perceived portrayal of Yasser Arafat Tuesday as a leader who has betrayed his people's cause will only spur Israel to hold a hardline against the Palestinians, a Palestinian official said.

In a U.N. address focused on Iraq Bush called on both Israel and the Palestinians to carry out commitments they made under a stalled U.S.-backed peace plan.

But in an apparent reference to Arafat -- whom the United States has sought to sideline -- Bush said the Palestinian cause was being "betrayed by leaders who cling to power by feeding old hatreds and destroying the good work of others."

"The Palestinian people deserve their own state and they will gain that state by embracing new leaders committed to reform, to fighting terror and to building peace," Bush said, echoing remarks he has made in the past.

Palestinian Labor Minister Ghassan Khatib called Bush's remarks unconstructive.

"It does not serve the cause of democracy when President Bush does not distinguish between a president who 'clings to power' through elections and one who does so by other methods," Khatib said. Palestinians elected Arafat president in 1996.

"The hatreds President Bush is speaking about are a result of the occupation and Israeli violence," he told Reuters.

"One of the bad things about such statements is that it encourages Israel to continue diminishing the rights of the Palestinian people and their leadership," Khatib added.

There was no immediate Israeli comment on Bush's speech.

The United States and Israel accuse Arafat of fomenting violence in a three-year-old Palestinian uprising for statehood, an allegation he denies.

After Palestinian suicide bombings killed 15 Israelis two weeks ago, Israel issued an open-ended threat to "remove" Arafat, and the United States vetoed a U.N. Security Council resolution aimed at blocking his possible expulsion.

MILITANT KILLED

In the Gaza Strip, Israeli troops killed an Islamic militant who tried to enter a Jewish settlement.

New Israeli government figures showed the population of Jewish settlements in the West Bank and Gaza Strip grew by 5.7 percent last year, despite U.S. pressure to halt construction.

The number of settlers living on occupied land increased to 220,100 in 2002 from 208,200 at the end of 2001.

The figures reflected a continued upward trend in movement to the settlements, whose population grew by five percent in 2001. Overall, Israel's Jewish population grew by 1.4 percent in 2002 to 5.1 million.

The international community considers the settlements illegal. Israel disputes this. The peace "road map" calls on Israel to freeze settlement construction.

The comparatively high growth rate in settlements is in part due to the high birth rate of religious and ultra-Orthodox couples who make up a large part of the population, a government official said.

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