New surge in Middle East violence

Palestinians have vowed to continue their fight

Israeli troops shot dead two Palestinians on Monday in a new surge of violence as Israeli Prime Minister-elect Ariel Sharon made progress in talks to try to forge a national unity government.

In another incident, more than 70 Palestinians were reported to have been injured by Israeli troops at a refugee camp near a Jewish settlement in the southern Gaza Strip.

The downfall of Sharon and his settlements is our goal - targets of our bullets and resistance

Fatah

The killings of the two Palestinians, at army checkpoints on the West Bank, underlined fresh tensions in Palestinian areas since hardliner Mr Sharon defeated Prime Minister Ehud Barak in elections last Tuesday.

Palestinian leader Yasser Arafat has been meeting Egyptian President Hosni Mubarak in an attempt to forge a united Arab stance in the face of the new hardline leadership in Israel.

Violence has intensified since Mr Sharon's election

Palestinian radio said the Israeli army shelled the Khan Younis refugee camp and opened fire with machine guns.

It said four of the injured were in a serious condition.

The Israeli army accused the Palestinians of firing an anti-tank rocket at an army post, but denied it had fired tank shells or rockets at the camp.

Doctors in the area said some of the injuries were from a black gas used by the Israelis. The Israeli army said it was a harmless smoke usually used to camouflage military movements. It denied firing the smoke into the refugee camp and said it was only used on the fringes of their military base.

The BBC correspondent in Jerusalem says there is pandemonium at Khan Younis, with people fleeing their homes.

Talks progress

Amid the background of violence, Likud party representatives and the Labour party reached an agreement on Monday night on the future of peace talks with the Palestinians, clearing the main hurdle blocking a national unity government, Israeli radio reported.

The two sides agreed that a joint government would only seek an interim accord with the Palestinians, not a final peace deal.

Labour's Dalia Itsik, an outgoing cabinet minister, said her party did not have a problem with trying to negotiate a long-term partial agreement, since efforts to reach a permanent peace deal had failed.

After a late-night drafting session, she said "considerable progress" was made.

An official for Mr Sharon's Likud party said the two parties had agreed on most of the guidelines for a national unity government.

Sharon's challenge

Earlier on Monday, Ofer Pines, the head of Labour's parliamentary group, was quoted by a spokesman as saying: "It's a dialogue of the deaf. There has been no progress."

Sharon's peace line

Jerusalem will remain undivided

No peace talks as long as violence persists

No more West Bank land - of which the Palestinians control 42% - will be transferred

Mr Sharon must form a government before the end of March to avoid new elections for parliament and prime minister.

The prime minister-elect has refused to accept proposals put to the Palestinians by the previous Israeli administration as a basis for talks, and is preparing to send a team of envoys to Washington to sell his tough line on the peace process.

Mr Sharon has said he will not talk to the Palestinians until the violence, which has raged since September, comes to an end.

Yasser Arafat's Fatah faction has vowed to keep shooting at Jewish settlements until they are removed, and said it hoped to topple Mr Sharon.

"The downfall of Sharon and his settlements is our goal - targets of our bullets and resistance," said a statement from Fatah's Bethlehem branch.

Correspondents say the latest violence represents a clear challenge to Mr Sharon, who campaigned on a platform of security and peace.

'Breathing space'

Egypt has already called on Mr Sharon to revise what it called his extreme position towards the Palestinians.

Hundreds of protesters have been shot dead

Egypt's official Mena news agency described Mr Arafat's meeting in Cairo as the start of Palestinian efforts in the Arab world and beyond to stress "the importance of sticking to past agreements and resuming Palestinian-Israeli negotiations where they broke off".

Our correspondent says, at an official level, Arab leaders are giving Mr Sharon some breathing space before condemning him outright.

Mr Barak had proposed establishing a Palestinian state in almost all of the West Bank and Gaza Strip, sharing Jerusalem, and dismantling many Jewish settlements in the Palestinian territories.

At least 387 people have died in more than four months of confrontation, the vast majority of them Palestinians.