"So far, in last two weeks, we saw that they did more or less what they promised to do," Mr Netanyahu said on the BBC's One's Breakfast with Frost programme.

"We'll still see that over the next two and a half months of implementing this accord."

But the prime minister expressed fears that Palestinian commitment to the agreement could slacken off after Israeli-occupied land was transferred to Palestinian control.

Binyamin Natenyahu: "Peace and terrorism cannot co-exist"

"The question that many Israelis say is: 'what happens after the Palestinian authority receives the territory? ... What will assure us that they will still keep their side of the deal and not make some bargain with Hamas to restart terrorist attacks?'"

Mr Netanyahu said he had told the Palestinians it was important not to lose the goodwill of Israelis.

"If we give you territory... and you allow it to be used as a staging ground for terrorists you will lose the goodwill of the Israeli people that you need to move further down the road in realising you aspirations," he said.

'100% percent effort'

Hamas: Israel concerned over attack threats

Mr Netanyahu gave an assurance that as long as the Palestinians made genuine efforts over Israeli security concerns, a single incident of failure to combat terrorism would not mean an end to the peace deal.

"It's the effort we are looking to," he said. "We have very good intelligence so we know if they're trying and what we want to see is that 100% of effort - which unfortunately has been missing up to now."

Saeb Erekat: "Netanyahu must put his money where his mouth is"

Regarding the coming rounds of talks over the specifics of a lasting settlement, the prime minister said he could be optimistic "if there's goodwill and seriousnes of purpose on the other side".

"To achieve a permanent peace beyond Wye... we'd have to strike a balance between Israel's needs to protect its vital interests - especially security - and the Palestinians' desire to govern their own lives."

But the prime minister accused Palestinian leader Yasser Arafat of acting unilaterally with his intention to declare Palestinian statehood if a settlement has not been reached by May 1999.

'Forcing the issue'

Saeb Erekat: Settlements and peace don't mix

Responding to the prime minister's remarks, Palestinian chief negotiator Saeb Erekat said: "I hope Mr Netanyahu puts his money where his mouth is".

Mr Erekat said the building of settlements for Israeli citizens in the occupied territories cast doubts on Mr Netanyahu's professed commitment to negotiations.

"He says that - and on the ground he is building more settlements, confiscating more Palestinian land," Mr Erekat said.

"He is forcing the issues by bulldozers rather than negotiations.

"We are urging Mr Netanyahu to refrain from unilateral steps and give peace process realistic chance it deserves.

"Just as terrorism and peace don't go together, settlements and peace don't go together."