Arafat and Peres meet

Posters in Jerusalem condemning Peres and Arafat

Palestinian leader Yasser Arafat and Israeli Foreign Minister Shimon Peres are meeting in Gaza in an effort to restart truce talks.

Early on Wednesday morning an explosion went off near an Israeli army position at Thermit in the Gaza Strip close to the Egyptian border, wounding three soldiers.

Palestinian security officials said five Palestinians were slightly wounded in a gun battle that broke out after the blast.

But Israeli Government sources told a BBC correspondent in Jerusalem that the long-delayed meeting would go ahead despite the explosion.

The meeting was originally scheduled for Sunday but Israeli Prime Minister Ariel Sharon cancelled it, saying Mr Arafat had ignored the 48-hour ceasefire demanded by Mr Sharon as a condition for resuming truce talks.

Explosion

Israel Radio reported that Palestinians had dug a tunnel under the army post over recent months, under cover of nightly gun battles, and filled it with explosives.

They then detonated the explosives at about 0300 (0100 GMT) on Wednesday, destroying a wall at the army base, and injuring the three soldiers - one seriously - according to the radio.

The place where Mr Peres and Mr Arafat are scheduled to meet is only a few minutes' drive from the site of the blast.

The United States has been urging Mr Sharon to resume negotiations, believing that calming Israeli-Palestinian violence is essential to enlisting Arab and Muslim support for its international coalition against terrorism.

In their meeting, scheduled for 0930 (0730 GMT) at Gaza airport, Mr Peres and Mr Arafat will discuss shoring up the fragile ceasefire declared last week.

If a lasting peace is established on the ground, they can then set about resurrecting the stalled peace process - including tackling the issues of Palestinian statehood and the final status of Jerusalem.

'Follow-up talks planned'

According to Israeli media, the two leaders have agreed to sign a document strengthening last week's truce, and have already scheduled follow-up talks.

Arafat and Peres were originally to meet on Sunday

An aide to Mr Sharon, Raanan Gissin, said Israel was limiting the meeting's agenda.

"If the meeting takes place, it will deal with only one issue: a cease-fire," he said.

The Palestinian side, however, insists on a broader agenda, to include a timetable for lifting Israeli roadblocks and travel restrictions, which have crippled the Palestinian economy.

US pressure

US State Department spokesman Richard Boucher welcomed the upcoming meeting.

"This is an important step which we hope will contribute significantly to reinforcing efforts to halt the violence and build a substantive political dialogue," Mr Boucher said.

"It does contribute, I think, towards solidifying the coalition and to making the point that the United States is not against Muslims, that this fight against terrorism is not a fight against the Muslim world," he added.

Mr Peres on Tuesday gave some indication of the pressure Israel has been under from the Americans to engage in talks with the Palestinians.

"The president of the United States calls the prime minister of Israel and puts extraordinary pressure on him... Secretary of State Colin Powell calls three times a day to ask for the meeting," Mr Peres told Israel Radio on Tuesday.

Violence cancels previous meeting

The talks were cancelled after the Israeli army said Palestinians fired two mortar shells at the Jewish settlement of Kfar Darom in Gaza on Saturday.

The mortars caused no injuries but they broke the two-day period of complete calm requested by Mr Sharon as a precondition for talks.

They were followed early on Monday by the killing by Palestinian gunmen of an Israeli woman in the West Bank.

But Foreign Minister Peres admitted on public radio on Tuesday that it was unrealistic to expect complete calm in the present climate.

"We are in the Middle East. It is a region with a lot of extremists and it is difficult to reach a situation where there is no incident," he said.

"There have been no car bombs or suicide attacks in Israel for three weeks, and I have noted a clear drop in Palestinian violence," he said.

However, Mr Gissin, appeared to contradict Mr Peres. He told the BBC that any violence would lead to the meeting being called off again.