Pope Benedict XVI called for "universal recognition" of both Israel's right to exist and the rights of Palestinians to an independent state.

In his traditional New Year's address Monday to world diplomats accredited to the Vatican, the pope recalled that during his trip to Israel, Jordan and the Palestinian Authority last May, he had "urgently appealed" for dialogue and respect between Israelis and the Palestinians.

"Once again I call for a universal recognition of the right of the State of Israel to exist and to enjoy peace and security within internationally recognized borders," he said. "Likewise, the right of the Palestinian people to a sovereign and independent homeland, to live in dignity and to enjoy freedom of movement, ought to be recognized."

The pope also called for "the protection of the identity and sacred character of Jerusalem, and of its cultural and religious heritage, which is of universal value."

In another development, the Vatican issued a statement over the weekend saying that the latest meeting of representatives of Israel and the Vatican had been "useful" in moving toward an agreement on unresolved financial issues clouding relations between the two states.

Members of the Bilateral Permanent Working Commission between the Holy See and Israel met last week in Jerusalem.