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President Bush says he's willing to resume the newly suspended talks with the Palestine Liberation Organization if Yasser Arafat denounces a recent foiled attack on an Israeli beach.

The president, who announced the suspension Wednesday, said the PLO "has not provided a credible account of this incident," in which a PLO affiliate group launched the attack on the beach near Tel Aviv.

"We've given the PLO ample time to deal with this issue," but PLO leader Arafat has refused to denounce it or discipline the leader of the group, the radical Palestine Liberation Front, Bush said at a news conference during a political trip to Alabama and North Carolina.

The president said the administration is willing to resume the talks if Arafat fulfills those conditions. Bush said he believes the 18-month U.S.-PLO dialogue has encouraged moderation within the PLO.

"But I can't point to the fact that that has really solved the question of Middle East peace. I feel that talking offers more potential than stiff-arming each other," he said. "And yet we can't digest it as long as this terroristic act is sticking in our throat."

Suleiman Najab, a member of the PLO's ruling Executive Committee, described Bush's action as a "flagrant defiance of the Palestinians, Arabs and world peace."

In Jerusalem, an aide to right-wing Prime Minister Yitzhak Shamir said Wednesday that the U.S. decision "removed a major obstacle" to peace.

Touching on other matters at the news conference, the president said:

-He has no plans to support a European move for an international economic aid package for the Soviet Union, although he is willing to discuss the matter with the allies.

-His press secretary, Marlin Fitzwater, acted appropriately in lambasting Democrats for partisanship in their criticisms on the government's massive savings and loan bailout.

-Said he would tell Nelson Mandela next week that American sanctions against South Africa will remain in place until conditions fixed under law are met. He also paid a tribute to South African President F.W. de Klerk for steps toward dismantling apartheid.