Israel has declared Mr Arafat 'irrelevant'
Israel declared Mr Arafat "irrelevant" and said it would no longer talk to him after he failed to bring those responsible for the surging violence in the Middle East to heel.
But US Assistant Secretary of State William Burns said in Damascus said the US still considers Yasser Arafat as the leader of the Palestinian people, and EU foreign policy chief Javier Solana repeated the message.
The fresh upsurge in violence has thrown a US peace initiative being led by special envoy Anthony Zinni into doubt.
Intervention calls
"We consider president Arafat to be the leader of the Palestinian people and we will continue to work with the Palestinian leadership as it must make the very difficult choices and move against the extremist groups who threaten the interests of the Palestinian people," Mr Burns said.
Mr Burns, who is on a tour of the Middle East, was speaking in Damascus after talks with Syrian President Bashar al-Assad.
During their meeting, Mr Assad asked the United States to "play a more active role in halting the Israeli aggression against the Palestinian people," according to Syria's official Sana news agency.
Mr Solana, who returned to Brussels from a Middle East visit on Wednesday, told Reuters News Agency that "terrorist acts" had set back diplomatic efforts in the region.
"But this doesn't mean we have to abandon any hope of a political resolution of the conflict," he said. "It can't be resolved militarily."
Deteriorating situation
A statement from Prime Minister Ariel Sharon's office issued after a special meeting of the security cabinet said Israel had decided to hold Mr Arafat "directly responsible" for terrorist attacks.
And the Israeli Justice Minister, Meir Sheetrit, said Israeli meetings with Palestinian security commanders, arranged by Mr Zinni, would now cease.
In reaction to Israel's decision Jordan, the current chair of the Arab League, has urgently begun contacting Arab and other countries, Foreign Minister Abdel Ilah Khatib said.
"We are anxious to avoid any even more serious worsening of the situation in the Palestinian territories in the wake of the Israeli move," Mr Khatib told AFP.
The move came as Jordanian King Abdullah II was quoted as saying Israel appeared determined to replace Mr Arafat.
"The Israelis are now talking seriously that whatever the alternative, it will be better than Abu Ammar," the king told the London-based Asharq al-Awsat newspaper, referring to Mr Arafat by his nom de guerre.
But Israel has denied that it plans to personally attack Mr Arafat or destroy his Palestinian Authority.
General Ron Kitrey, chief spokesman for the Israeli army, said that Israel has "no intention to bring down the Palestinian Authority or to harm Yasser Arafat physically or even to expel him."