WASHINGTON - In his address at the opening of the multi-national meeting at Annapolis today, President George Bush will call for a settlement on the basis of two nation states, according to Israeli sources who have been briefed about the text. Bush will declare Israel the national home of the Jewish people, and Palestine as the national home of the Palestinians.

The president will also address the issue of the Palestinian refugees, and the need to resolve their suffering, saying that they can return to the Palestinian state.

According to Israeli sources, Bush will not offer a detailed formula for determining the future border between Israel and Palestine, but will refer to his April 2004 letter to then prime minister Ariel Sharon, which talked of establishing an agreed border along the cease-fire lines (the Green Line), with consideration being given to the changes affected by the settlement blocks in the West Bank.

The president will not propose a formula for a settlement of the Jerusalem issue, which is considered to be the most sensitive of the three main core issues.

Bush will also talk of the need to implement the settlement in accordance with the road map, and will declare that the United States will oversee the implementation of each side's commitments that are part of the agreement.

The American president will also call for the normalization of relations between Israel and the Arab world, in parallel with progress in negotiations between Israel and the Palestinians.

The Israeli sources said they were satisfied with the president's expected speech, which will present his updated vision for an Israeli-Palestinian settlement.

"We have no problem with any part of the speech," they said.

Immediately after the Annapolis summit, tomorrow, the Bush administration would like to hold a ceremony inaugurating the final-status negotiations.

Israel opposed this, and Prime Minister Ehud Olmert said during his meeting with Bush yesterday that the negotiations will be carried out in Jerusalem. However, a source in Olmert's entourage said that it is possible that a ceremonial event is held in Washington to inaugurate the talks.

President Bush met separately yesterday with Olmert and with Palestinian Authority Chairman Mahmoud Abbas. During part of the meeting with Bush, Olmert included Foreign Minister Tzipi Livni and Defense Minister Ehud Barak. The discussion focused on the summit and the negotiations with the Palestinians.

Secretary of State Condoleezza Rice gave a positive assessment on the developments prior to the summit. President Bush said "I am optimistic, and I know that you are optimistic," during a photo-op with Olmert in front of the media.

Olmert told Bush that every settlement must also include the PA taking responsibility for preventing terrorism from the Gaza Strip, which has been under the control of Hamas since June.

"It is axiomatic," Olmert told reporters. "We will not be able to accept the fact that they [the Palestinians] will be relieved of the obligation to prevent terrorism from the Gaza Strip. The obligations [included] in the road map apply to all the territories that are supposed to be part of the Palestinian state. If the Palestinians wish to give up the Gaza Strip as part of their state, we can discuss that. But if not, they need to fulfill their commitments."

At the completion of the meeting that included Livni and Barak, Bush and the Olmert held a private meeting during a walk in the Rose Garden near the Oval Office.

The Annapolis summit will begin today with a meeting between Bush, Abbas and Olmert, who will fly in helicopters to the grounds of the U.S. Naval Academy. Later the three leaders will address the summit and will depart. At that point the conference will begin at the Foreign Minister level, which will be conducted by Secretary Rice.

The conference will be divided into three sessions: Israeli-Palestinian negotiations; building Palestinian governance; and "comprehensive peace," which is the agreed term for an agreement between Israel, Syria and Lebanon.

Meanwhile, contact between the Israeli and the Palestinian negotiating teams continued yesterday in a final effort to reach a common declaration. Israeli sources said that the declaration is ready, and includes only general statements regarding the future negotiations.

Livni, who heads the Israeli negotiating team, and her Palestinian counterpart, former PA prime minister Ahmed Qureia, met with Rice on Sunday night, but could not reach an agreement.

The two met Rice yesterday for one final effort. According to sources in the Israeli delegation to the summit, a joint declaration will be made at the end of the summit.

Sources in the Israeli delegation continue to reiterate that "for us the declaration is not important, and the problem is with the Palestinians."

An Israeli political source said that "from our point of view, we can do without a declaration, but the Americans are very interested in one."

For his part, Olmert told reporters in Washington that "difficulties in drafting the declaration are a tactical and circumstantial matter that does not reflect on how the negotiations will be conducted in the future."

Olmert also expressed his hope that the two sides would achieve a common declaration.

"It is a good thing to have a paper, but we do not intend for solutions to be [included] there, only the meanings that we want this summit to have - that we want to start the future negotiations between us and the Palestinians."