Israel's prime minister and his Palestinian counterpart meet Tuesday to discuss the way ahead for a US-led peace plan after a partial Israeli pull-out from the Gaza strip and a truce by Palestinian guerrillas.

Palestinians wave and flash a victory sign from a truck as they pass an Israeli checkpoint after Israeli soldiers removed the cement barricades from the main road of Deir El-Balah near the Jewish settlement of Kfar Darom in the southern Gaza Strip June 30, 2003.[Reuters]

The announcement of the talks between Israel's Ariel Sharon and reformist Palestinian Prime Minister Mahmoud Abbas came after the truce faltered on its first day Monday when Palestinian militants shot dead a foreign worker.

The attack, killing a Bulgarian in the West Bank, underlined the fragility of peace moves after 33 months of violence. The latest truce was declared by leading militant factions and Palestinian President Yasser Arafat's Fatah movement.

Sharon told a meeting of his parliamentary Likud faction on Monday that progress in peace talks depended on Palestinians "absolutely" suppressing violence. But he also said "a certain number" of Palestinian prisoners in Israel would be freed.

"Our readiness and ability to take risks to give the process a chance will grow if there will be quiet," Sharon said.

At the meeting expected to be held in Sharon's office in Jerusalem, Abbas is likely to present the militants' agreement to a truce as evidence of his reformist government's effectiveness in securing quiet.

But Sharon has demanded the dismantling of militant groups such as Hamas, which Israel fears will regroup during the cease-fire. He told the Likud there must be "a real war of the Palestinians against terror. Dismantling terror organizations will bring progress."

Palestinian spokesmen have said that Israel could help reduce support for militants by easing Palestinian daily life and withdrawing from Palestinian towns reoccupied at the peak of a Palestinian uprising for statehood last year.

AGREEMENT TO LEAVE BETHLEHEM

Palestinian Security Minister Mohammed Dahlan told Reuters that Israel had agreed to leave the West Bank town of Bethlehem, the traditional birthplace of Jesus, Wednesday as its next confidence-building measure.

But a senior Israeli security source told Reuters the deal on Bethlehem was "not final." The security officials will hold their own separate meeting Tuesday to discuss it.

Israeli Prime Minister Ariel Sharon attends a Likud party meeting in the Knesset in Jerusalem, June 30, 2003. Palestinian Prime Minister Mahmoud Abbas will meet Sharon on Tuesday to discuss a US-backed peace plan despite new violence, Abbas' office said on Monday.[Reuters]

The talks between Sharon and Abbas will be the third since Abbas took office in April in a move, orchestrated by the United States and Israel, to reform the Palestinian Authority.

Issues include a Bethlehem pullout, completion of Israel's withdrawal from the Gaza strip and Palestinian prisoners.

Sharon recently described Abbas as a "chicken without wings" for failing to take action against militants, but in an apparent indication of goodwill, several leading Israeli and Palestinian ministers will participate in the meeting, army radio reported.

The United States, the main sponsor of the "road map" designed to lead in steps by both sides to a Palestinian state and peace agreement by 2005, said the peace process may be "entering a new era."

"The President (George W. Bush) is encouraged by the work that the Israelis are doing together with the Palestinian Authority leaders," White House spokesman Ari Fleischer said.

Since Sunday, Palestinians and Israelis have taken the first tentative steps to implement the road map, drawn up by the United States, Russia, the European Union and United Nations. Many ordinary Israelis and Palestinians remain skeptical.

The plan charts steps leading to a Palestinian state on Gaza and West Bank territory by 2005, and requires Palestinian police to fill security gaps wherever Israel has withdrawn.

Israeli forces left the Gaza town of Beit Hanoun at the weekend. Monday, troops withdrew from the territory's main highway, ending a blockade dating from the outbreak of the uprising and reuniting north with south Gaza.

The army Tuesday reported five more shooting incidents since the Palestinian militants' cease-fire was announced. But it reported no further casualties.

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