"As a citizen, and as president, I believe that Muslims have the same right to practice their religion as everyone else in this country," Obama said, weighing in for the first time on a controversy that has riven New York City and the nation.

"That includes the right to build a place of worship and a community center on private property in lower Manhattan, in accordance with local laws and ordinances," he said. "This is America, and our commitment to religious freedom must be unshakable."

Obama made the comments at an annual dinner in the White House State Dining Room celebrating the Islamic holy month of Ramadan.

The White House had not previously taken a stand on the mosque, which would be part of a $100 million Islamic center two blocks from where nearly 3,000 people perished when hijacked jetliners slammed into the World Trade Center towers on Sept. 11, 2001. Press secretary Robert Gibbs had insisted it was a local matter.

It was already much more than that, sparking debate around the country as top Republicans including Sarah Palin and Newt Gingrich announced their opposition. So did the Anti-Defamation League, a Jewish civil rights group.

Obama elevated it to a presidential issue Friday without equivocation.

While insisting that the place where the twin towers once stood was indeed "hallowed ground," Obama said that the proper way to honor it was to apply American values.

"Our capacity to show not merely tolerance, but respect towards those who are different from us — and that way of life, that quintessentially American creed, stands in stark contrast to the nihilism of those who attacked us on that September morning, and who continue to plot against us today," he said.

Obama harkened back to earlier times when the building of synagogues or Catholic churches also met with opposition. "But time and again, the American people have demonstrated that we can work through these issues, and stay true to our core values and emerge stronger for it," he said. "So it must be and will be today."

New York City Mayor Michael Bloomberg, an independent who has been a strong supporter of the mosque, welcomed Obama's words as a "clarion defense of the freedom of religion."

But some Republicans were quick to pounce.

"President Obama is wrong," said Rep. Peter King, R-N.Y. "It is insensitive and uncaring for the Muslim community to build a mosque in the shadow of ground zero. While the Muslim community has the right to build the mosque they are abusing that right by needlessly offending so many people who have suffered so much."

Entering the highly charged election-year debate, Obama surely knew that his words would not only make headlines but be heard by Muslims worldwide. The president has made it a point to reach out to the global Muslim community, and the over 100 guests at Friday's dinner included ambassadors and officials from numerous Muslim nations, including Saudi Arabia and Indonesia. Seated around candlelit tables, they listened closely as Obama spoke, then stood and applauded when the president finished his remarks.

While his pronouncement concerning the mosque might find favor in the Muslim world, Obama's stance runs counter to the opinions of the majority of Americans, according to polls. A CNN/Opinion Research poll released this week found that nearly 70 percent of Americans opposed the mosque plan while just 29 percent approved. A number of Democratic politicians have shied away from the controversy.

The group behind the $100 million project, the Cordoba Initiative, describes it as a Muslim-themed community center. Early plans call not only for prayer space but for a swimming pool, culinary school, art studios and other features. Developers envision it as a hub for interfaith interaction, as well as a place for Muslims to bridge some of their faith's own schisms.

Opponents, including some Sept. 11 victims' relatives, see the prospect of a mosque so near the destroyed trade center as an insult to the memory of those killed by Islamic terrorists in the 2001 attacks. Some of the Sept. 11 victims' relatives, however, are in favor.

The mosque has won approval from local planning boards but faces legal challenges, and New York's Conservative Party is planning a television ad campaign to pressure a New York City utility to use its power to block the project.

Other luxury goods brands also performed well in the six months to June 30, though the group's retail arm reported a drop in sales due to slow French spending. The Gucci handbags, which also owns British brands Stella McCartney and Alexander McQueen, said first-half net profit came to some £104.1 million - beating forecasts. He added: "The PPR Group is well positioned to improve its performance, as the trends of July and August clearly indicate."

PPR chairman and chief executive François-Henri Pinault said: "Thanks to its positioning on two activities - the rapidly growing global luxury goods universe, and stable, mature retail markets - the group enjoys a higher profitability profile than that of the markets in which it participates. "Luxury goods posted excellent first-half results, notably at Gucci and Bottega Veneta."

On Wednesday, the world's largest luxury goods company LVMH posted an 11 per cent rise in operating profit and stuck to its 2005 earnings goals despite adverse currency effects and a provision for the closure of its flagship Parisian store, Samaritaine.French luxury goods companies have shrugged off the impacts of a weaker dollar, global political unrest and the threatened resurgence of avian flu to show strong performance in the first half.In the cheap Gucci Sale sector, operating income leapt 76 per cent to around £72.7m with the margin doubling to eight per cent, although PPR warned that the higher comparative base in the second half might temper the growth rate.

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