JERUSALEM (AFP) - Israeli Prime Minister Benjamin Netanyahus conditional acceptance of a Palestinian state came under fire on Monday, with the Arab world and Palestinians saying it killed chances of a peace deal. The United States, Israels main ally, saw the address as an important step forward and the European Union as a step in the right direction, but Israeli observers said it amounted to empty rhetoric. After months of US pressure, the premier broke with his right-wing Likud partys ideology on Sunday and endorsed the two-state solution, the cornerstone of international Middle East peacemaking efforts for years. But he set a slew of conditions: Palestinian recognition of Israel as a Jewish state; full demilitarisation of the future state that will not control its air space or have the ability to forge military pacts; and ironclad security guarantees for Israel. The Palestinians blasted the address in which Netanyahu laid out the peace policies of his 11-week-old government. He spoke of a demilitarised state, but he also stripped it of all sovereignty attributes, transforming it into a protectorate of isolated cantons, said Yasser Abed Rabbo, a senior aide to Palestinian President Mahmud Abbas. Netanyahu is defying the world. The international community should reply by pressure to isolate Netanyahu and his policies and force Israel to submit to the peace process, he said. Egyptian President Hosni Mubarak said Netanyahus demand that Palestinians recognise Israel as a Jewish state in a final deal something they have long refused to do scuppers the possibility for peace. No one will support this appeal in Egypt or elsewhere, the state news agency MENA quoted the leader of one of only two Arab countries to have signed peace treaties with Israel as saying. State media of Israels arch-foe Syria slammed Israeli Prime Minister Benjamin Netanyahu for torpedoing peace in a speech accepting a Palestinian state but shackled by unacceptable conditions. Netanyahus speech torpedoes all peace efforts wrote the mass-circulation Al-Watan in its report of Sundays speech. Al-Baath, the mouthpiece of Syrias ruling party, commented: Netanyahu has confirmed that he rejects the Arab initiative for peace along with all the initiatives and resolutions of the Security Council relative to peace in the Middle East. The Palestinians also slammed Netanyahu for not heeding the US call to halt all settlement activity, something they have demanded in order to relaunch negotiations that the two sides revived at a US conference in Nov 2007 but that were suspended during the Gaza war earlier this year. Asked in an interview with NBC News on Monday about his refusal to freeze construction in existing settlements, Netanyahu evaded the question, stressing instead his pledge not to authorise new settlements. I think (US) President (Barack) Obama and I are trying to reach a common understanding on this, he told the US network. In Israel, the Ynet news website said the speech amounted to the same old babble, while Ayoob Kara, an MP with Netanyahus Likud party, termed it a pain killer to stop international pressure. While agreeing to a Palestinian state may have been difficult for the leader of the right-wing Likud party one daily said he vomited the words the move was mostly aimed at pleasing Israels main ally, they said. The White House termed Netanyahus speech an important step forward. On the domestic side, Netanyahu drew criticism both from within his hawkish coalition, where many felt he went too far, and from the left which considered he didnt go far enough. Meanwhile, a Russian foreign ministry source said on Monday that Israeli Prime Minister Benjamin Netanyahus conditional backing for a Palestinian state does not open the way to solving the Middle East conflict. This certainly shows a readiness for dialogue but it does not open the way for solving the Israeli-Palestinian problem, the RIA Novosti news agency quoted the source as saying after a keynote speech by Netanyahu.