JERUSALEM : Visiting US President George W. Bush paid a 60th anniversary tribute to Israel as a democracy challenged by "terrorists" on Wednesday just before a rocket attack wounded 14 people in a shopping mall.

Bush called Israel a "thriving democracy" which "like other democracies, is being challenged by extremists and terrorists."

Shortly afterwards, a rocket fired by militants from the Gaza Strip slammed into the mall in the southern city of Ashkelon, wounding the 14, including two babies and a young girl.

Ben Cohen, who works at a restaurant in the mall, said the explosion struck the third floor of the building, and other witnesses said part of the building collapsed.

Bush was in Jerusalem on a three-day visit to join Israel's celebrations for its 60th anniversary.

Palestinians were meanwhile holding solemn commemorations of what they call the Naqba, or catastrophe - the mass exodus of refugees at the birth of the Jewish state.

"We must be steadfast and we must be strong in the face of those who murder the innocent to achieve their objectives" Bush said in his first comments after the rocket attack.

His national security spokesman Gordon Johndroe blamed the attack on the Islamist Hamas movement which has controlled Gaza since ousting forces loyal to moderate Palestinian president Mahmud Abbas last June.

But, while Hamas praised the attack, two other smaller militant groups said they carried it out.

"We condemn this terrorist attack by Hamas and offer our condolences to those who were affected," Johndroe said.

"Political goals will never be achieved by launching rockets from Gaza onto innocent women and children."

Israel has carried out repeated military operations against Gaza in a bid to halt the rocket and mortar fire by militant groups. Earlier on Wednesday, it killed four Palestinians there, at least three of them militants, medics said.

Bush's visit comes amid renewed turmoil in the region, which bodes ill for Israeli-Palestinian peace negotiations that have made little tangible progress since they were revived at a conference he hosted in November.

Israel and Palestinian militants have talked separately to Egyptian mediators about a possible truce, but Hamas rejected Israel's demand that it first free an Israeli soldier captured by the Islamists almost two years ago.

After his talks with Bush, which came just before the rocket attack on Ashkelon, Prime Minister Ehud Olmert stressed that Israel would hold Hamas responsible for any attack launched from Gaza.

"The government of Israel ... will take the necessary steps so that this will stop," he said.

Bush too hit out at the Islamist group and vowed to do all he could to do boost its Palestinian opponents.

"Hamas' objective - stated objective - is the destruction of the state of Israel. We'll stand strongly with Israel as well as stand strongly with the Palestinians who don't share their vision," he told reporters.

During his Middle East tour, the US president is also to visit Saudi Arabia to mark 75 years of US relations with the world's leading oil producer, and hold talks in Egypt with regional leaders, including moderate Palestinian president Mahmud Abbas.

The visit to Israel is Bush's second this year - after seven years in which he did not set foot in either the Jewish state or the Palestinian territories.

He is due to address Israel's parliament on Thursday, the same day that Palestinians are to mark the Naqba and launch thousands of black balloons over Jerusalem.

Bush's national security advisor Stephen Hadley called Israel's 60th birthday "a great event" although he acknowledged it also "resulted in hardship for many Palestinian people."

He said Bush was determined to "redeem that hardship" by helping to create a Palestinian state, "a homeland for the Palestinian people in the same way that Israel 60 years ago became the homeland for the Jewish people."

The US president hopes a peace deal between Israel and the Palestinians will shore up his legacy and has expressed confidence an agreement can be reached before his term of office ends in January despite the lack of any tangible progress in negotiations.

But Palestinians are concerned that corruption allegations against the Israeli prime minister could further stall the peace efforts.

Since Olmert and the Palestinian president relaunched the peace process in November, their talks have been hobbled by Israel's continuing expansion of Jewish settlements in the occupied territories and by the persistent violence in Gaza. - AFP/de