Egyptian President Hosni Mubarak said a call for Palestinians to recognize Israel as a Jewish state, issued by Israeli Prime Minister Benjamin Netanyahu, "aborts" any chance of peace between the two sides.Netanyahu said yesterday, for the first time, that he would accept a demilitarized Palestinian state provided it recognizes Israel as a Jewish homeland. His comment was welcomed as "an important step forward" by the administration of President Barack Obama.Mubarak, a U.S. ally, said he told Obama this month that the peace process was being complicated by Netanyahu's conditions and his rejection of any negotiations over the fate of east Jerusalem, which the Palestinians want as the capital of their future state."I told President Obama that solving the crises of the Arab and Muslim worlds goes through Jerusalem," Mubarak, whose country signed a peace treaty with Israel three decades ago, said today in a speech to Egypt's Special Forces. "I stressed that the call to recognize Israel as a Jewish state makes the situation more complicated and aborts the chances of peace."Arab countries say that a declaration of Israel as a Jewish state precludes talks of a "just solution" to the question of the return of Palestinians who fled their homes in the 1948 and 1967 Middle East wars. They also say such a declaration infringes on the rights of Christian and Muslim Arabs living in Israel.