The prime minister has hailed a "renewed sense of vigour and optimism" in the Middle East peace process.

Speaking after breakfast talks with US President Bush in Brussels on Tuesday, Tony Blair said the recent Palestinian elections and ceasefire with Israel were a significant step forward in international relations.

The two leaders also praised the elections in post-war Iraq, following their first face-to-face meeting since the polls.

Blair said it is now possible to see a "stable and prosperous and democratic state" emerging from their controversial decision to overthrow the Saddam Hussein regime.

And both men claimed relations between Europe and America are improving after the bruising experience over Iraq.

The alliance "has been the cornerstone of our security for many many years, it's based on shared values" the prime minister said.

"It's absolutely the right thing for us to have at the centre of our relations and we will do everything we can to make sure that relationship is strong," he added.

He argued that the president had set out a "clear way forward" for the international community in his speech in Brussels on Monday.

Bush praised Blair as "one of the strong leaders in Europe".

He said: "As I said in my speech yesterday, a strong Europe is very important for the United States and I really meant that."