Gun battle ends Mid-East lull

Even Christmas has been affected by the conflict

Fierce fighting has been reported between Israeli troops and Palestinians on the West Bank.

Reuters news agency quoted witnesses as saying that Palestinians opened fire overnight on a Jewish settlement near the city of Nablus.

Israeli military sources said the troops responded with heavy machine-gun fire.

No casualties were reported immediately from the incident.

The fighting was among the fiercest of the Christmas period, which has seen a relative lull in the three months of violence in the Palestinian territories.

Conditional acceptance

The two sides have been considering US proposals for reviving peace talks.

Barak: Upbeat about peace proposal

Israeli Prime Minister Ehud Barak said that he would accept a compromise peace deal proposed by US President Bill Clinton - provided the Palestinians do the same.

His remarks followed Palestinian leader Yasser Arafat's comments that the deal did not remove the "obstacles to peace".

In an interview for Israeli TV, Mr Barak said that he owed it to Mr Clinton, who had invested seven and a half years in the peace process, to discuss the proposal.

But he added that it was far from clear that the Palestinians would accept the offer.

Mr Arafat stopped short of rejecting the US ideas, saying they needed to be examined in greater detail.

Reported American proposals

Israel to concede sovereignty over much of East Jerusalem and the Al-Aqsa mosque

Palestinians give up the right of return for Palestinian refugees

Palestinian state on 95% of the West Bank and 100% of the Gaza Strip

The Palestinians and Israelis are both engaged in internal consultations, and are due to tell Mr Clinton by Wednesday whether his proposals are an acceptable framework for tackling the thorniest issues in the conflict - including the status of Jerusalem.

Mr Arafat said after returning from talks with Egyptian President Hosni Mubarak that some of the proposals had not been modified since the Camp David summit, held in the US last July, which broke down without agreement with both sides blaming the other for the failure.

Arafat did not reject the American proposals

Israel's cabinet met into the early hours of Monday morning to discuss the proposals.

Mr Barak warned his ministers that Israel would face increasing international isolation if a peace deal were not reached soon.

Time pressure

Mr Barak is anxious to secure a deal because polls show it could be his only chance of winning re-election as prime minister on 6 February.

Mr Clinton is also eager to achieve a deal before he leaves office on 20 January.

"We are talking about a difficult discussion for both sides on the most painful of issues," Mr Barak said.

About 350 people - mostly Palestinians - have been killed in nearly three months of violence in the West Bank and Gaza Strip.