NEW YORK ÷ U.N., European and Russian diplomats split sharply with the Bush administration Tuesday over the future of Yasser Arafat, insisting over U.S. objections that the Palestinian leader legitimately heads his peopleâs statehood movement.

In a two-hour meeting that made some headway on Palestinian reform and assistance, they told Secretary of State Colin Powell they support Arafat and demanded swift progress toward setting up a Palestinian state.

Powell stood firm on President Bushâs insistence that ending violence must take precedence over other goals, including Palestinian statehood. Tuesdayâs bloody attack on Israelis on the West Bank was cited by Powell as another example that Arafatâs leadership was not helping create a state so long as terror remained unchecked.

ãEverything begins with creating a better sense of security,ä Powell said at a news conference after the meeting.

U.N. Secretary General Kofi Annan politely disagreed with U.S. policy. ãWe all need to show progress on the other tracks,ä which include statehood, Annan said. And while he deplored the attacks on Israelis, he used Tuesdayâs incident as further evidence Israel must end its occupation of the West Bank and Gaza.

Annan, Russian Foreign Minister Igor Ivanov and Danish Foreign Minister Per Stig Moeller supported Arafat as the legitimate leader of the Palestinian people. Denmark currently holds the presidency of the European Union.

EU diplomat Javier Solana indirectly challenged the Bush administrationâs assertion of corruption within Arafatâs Palestinian Authority. Solana said no international assistance program works better than European aid to the Palestinians, which is channeled through the authority. U.S. aid goes directly to the people through the United Nations and the Red Cross and other private groups.

Powell has suggested in recent interviews that a compromise could be fashioned on Arafat that would allow him a nominal leadership post but no governing power in the Palestinian Authority. Pressed Tuesday at a news conference, however, he would not elaborate. ãThis is not about personalities,ä he said, but about aid and reform.

Powell also refused to urge restraint on Israel in the face of terror. ãIsrael is a sovereign country and will have to reach its own decisions,ä he said.

The clash of views on Palestinian leadership overshadowed a general sympathy for the plight of the Palestinian people. Powell, Annan, Ivanov and Solana agreed that ways must be found to channel more help to the Palestinians.

The four expressed their ãincreasing concern about the mounting humanitarian crisis in Palestinian areas and their determination to address urgent Palestinian needs,ä an official statement said. They agreed on the need for a coordinated international campaign to support Palestinian efforts at political and economic reform and urged Israel to relax its curbs on Palestinian travel and withdraw its forces from Palestinian-held areas as security improves.

Even on the aid question, discord was evident.

President Bush, in demanding Arafatâs ouster, has accused the Palestinian Authority of corruption and ordered that all U.S. aid be distributed to circumvent the authority.

By contrast, European governments and other donors submit some of aid directly to Palestinian leaders. Solana, angry over allegations that money is skimmed off, told a joint news conference that no international aid program functions more effectively.

Underscoring the Bush administrationâs determination to end Palestinian attacks on Israel, Powell said, ãEverything begins with creating a better sense of security.ä

But Annan said, ãWe need to show progress on the other fronts.ä Without such progress, Annan said, it will be difficult to curb violence.

Ivanov defended Arafatâs leadership role, calling him the elected leader of the Palestinians. Denmarkâs Moeller said Europe believes Arafatâs status as the elected Palestinian leader requires dealing with him.

The latest violence in the Middle East occurred near an Israeli settlement on the West Bank. Palestinians wearing Israeli army uniforms detonated a bomb as an armored bus passed by headed for the settlement, then shot at civilians as they fled, authorities and witnesses said. It was the first deadly attack on Israeli civilians since June 20.

At the White House, presidential spokesman Ari Fleischer said: ãThe president condemns the latest act of violence in the Middle East. This underscores the importance of focusing on peace and working with leaders in the Palestinian Authority who are dedicated to peace.ä

Fleischer also said that since Bushâs June speech calling for new leadership in the Palestinian Authority, ãthere have been some interesting rumblings from within the Palestinian Authority about the direction they would like to go in the future.ä