AP Diplomatic WriterNEW YORK (AP) -- U.N., European and Russian leaders split sharply with the Bush administration Tuesday over the future of Yasser Arafat, insisting that the Palestinian leader legitimately heads his people's statehood movement.

During two hours of high-level talks, these leaders said they also told Secretary of State Colin Powell that headway must be made, not just in curbing violence but in settling the Arab-Israeli conflict.

Their diverse views overshadowed a uniform concern for the plight of the Palestinian people. Powell, U.N. Secretary-general Kofi Annan, Russian Foreign Minister Igor Ivanov and European Union diplomat Javier Solana agreed that ways must be found to get more help to the Palestinians.

But even on that issue, there was evident discord.

President Bush, in demanding Arafat's ouster, has accused the Palestinian Authority of corruption, and U.S. aid is distributed to circumvent that body.

By contrast, European governments and other donors submit some of their assistance to the Palestinian leadership. 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 administration's determination to end Palestinian attacks on Israel, Powell said, "Everything begins with creating a better sense of security."

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

Ivanov defended Arafat's leadership role, calling him the elected leader of the Palestinians. And Danish Foreign Minister Per Stig Moeller, whose government currently holds the presidency of the European Union, said Arafat's election as the Palestinian leader requires dealing with him.

While Bush has urged Arafat's removal, Powell in two recent interviews has spoken favorably of some sort of role for the Palestinian leader. Asked to elaborate, Powell declined, saying, "Our concern right now is not about individuals but about the people."

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

Annan deplored the attack. At the same time, he used the incident to renew his support for a Palestinian state and for Israel to end its occupation of the West Bank and Gaza.

At the White House, press secretary Ari Fleischer said: "The 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."

Fleischer also said that since Bush's June speech calling for new leadership in the Palestinian Authority "there have been some interesting rumblings from within the Palestinian Authority about the direction they would like to go in the future."

Bush will meet on Thursday in Washington with Maher, Muasher and the foreign minister of Saudi Arabia, Prince Saud al-Faisal, and Powell is likely to do the same.

On Aug. 1, King Abdullah of Jordan will visit Washington to meet with President Bush.

The Bush administration would like to skirt the Palestinian Authority, which it suspects of corruption, and already is channeling about $142 million a year in assistance through the United Nations, the Red Cross and other private groups. In April, on a trip to the region, Powell pledged an additional $30 million in aid.

The Europeans provide about $9 million a year in assistance. Unlike U.S. aid, it goes directly to the Palestinian Authority.

Powell hopes future European contributions can be made directly to the people or at least in ways that provide controls against skimming. Approval of the plan is expected, a U.S. official said Monday, speaking on condition of anonymity.

In preliminary moves, Assistant Secretary of State William Burns has set up an international task force on reform with U.N., Russian and European Union officials. A deputy, Elizabeth Cheney, followed up last week in London, talking with officials from Norway, Japan, the World Bank and the International Monetary Fund.

Through the U.S. Agency for International Development, the United States provides $62 million in aid for health care, water system repairs and emergency food. Another $80 million is contributed annually to the U.N. Relief Works Agency.

Bush has called for new leadership to replace Palestinian leader Yasser Arafat. Powell on Monday told ABC-TV's "Nightline" he was more than willing to consider a solution that would create the post of president for Arafat and prime minister for another Palestinian leader.