Palestinian militant groups Monday rejected a new deal to ease Israel's military clampdown in the Gaza Strip and a West Bank city in return for a reduction of violence, dimming hopes for a lasting ceasefire.
Meanwhile, Israeli Foreign Minister Shimon Peres Monday expressed optimism about the new agreement but cautioned that obstacles still remain.
The agreement was sealed in a meeting on Sunday between Israeli Defense Minister Binyamin Ben-Eliezer and a Palestinian delegation headed by Interior Minister Abdel Razzak al-Yahya and President Yasser Arafat's security adviser, Mohammed Dahlan.
The deal, which would call for an Israeli pullout from Bethlehem and parts of Gaza, yielded the first significant progress in months towards staunching nearly two years of bloodshed in which at least 1,503 Palestinians and 588 Israelis have died.
But Palestinian militant groups including Hamas, Islamic Jihad and the Popular Front for the Liberation of Palestine said they rejected even a limited cessation of their 22-month-old uprising against Israeli occupation and would continue to mount attacks.
"The resistance will find ways to pursue the fight without clashing with the Palestinian Authority," senior Hamas official Abdel-Aziz al-Rantissi told Reuters. "Our rifles will remain directed against the Zionist enemy and only against the Zionist enemy."
Hamas spokesman Ismail Haniya told The Associated Press the plan "is nothing but an Israeli plot to sabotage the intefadeh. The Palestinian uprising is legitimate self defense."
Islamic Jihad leader Abdallah al-Shami called the move a "political gamble." Both groups have led a campaign of suicide bombings which have killed scores of Israelis in the uprising.
Israeli settlers expressed frustration in a statement Monday that Israeli soldiers were planning to pull back "just when the first clear signs of exhaustion and surrender can be seen on the Palestinian side."
Israeli Foreign Ministry spokesman Mark Sofer called the deal "a glimmer of hope," but said Israel expected Arafat's Palestinian Authority to rein in Hamas and other militants.
Sofer told the AP that the deal was contingent on Palestinians security forces halting Palestinian attacks on Israelis.
"If the Palestinians can and will take control of the security situation we can move forward on easing the humanitarian and economic situation of the Palestinians themselves," Sofer said Monday. "But crucial for us is that five minutes after evacuating an area or a check post, we will not see a suicide bomber or a car bomb passing through that very area we have evacuated."
Peres, visiting Finland, said he believed the agreement could work because of the global anti-terror campaign since last year's Sept. 11 attacks on U.S targets, and a change of heart among some Palestinian leaders.
"Since September 11, every leader and every movement is being asked to make a question, 'Are you harboring terror or fighting terror?' There is a world war against terror," Peres told reporters after arriving in Helsinki for meetings with Finnish leaders.
Israel's Defense Ministry said under the deal, the Palestinians would "take responsibility to calm the security situation and reduce violence and terror" and Israel would "do everything in order to ease conditions on the Palestinian population."
Sources from both sides gave few details, but a senior adviser to Arafat said that under the deal Israeli forces were to pull out of Bethlehem and some areas they occupy in Gaza "in the next 48 hours."
"The Palestinian national security forces will be deployed (in those areas)," the adviser, Nabil Abu Rdainah, told Reuters. "This step will be followed by more steps in the next few days for a withdrawal (by Israel) from all cities."
Israeli officials have given no concrete indications of when the Gaza-Bethlehem pullout would take place or whether additional withdrawals were being considered.
In Bethlehem, the Israeli army lifted its curfew on the city until the evening. Residents said few troops were seen during the daylight hours and tanks remained on the outskirts of the city, suggesting a pullout might not involve large forces.
Palestinian sources said a pullback in Gaza would require Israeli forces to open the main roadway, which has been severed in several places by army checkpoints, and also leave "buffer zones" they have set up near at least five Gaza towns.
Israel reoccupied seven West Bank cities in June following a spate of suicide bombings by Palestinian militants.
The Defense Ministry said the sides also agreed to a new round of security talks by lower-ranking military officers in the West Bank and Gaza Strip in the next few days.
"The importance of the initiative is that it will build trust for both sides, which is essential for any future security and diplomatic steps," the ministry quoted Ben-Eliezer as saying.
The evening talks in Tel Aviv were the first since August 7, when top security officials on both sides failed to agree on Ben-Eliezer's plan to ease a military clampdown in the fenced-in Gaza Strip as a test case before expanding it to the West Bank.
Palestinian security officials had demanded at least one West Bank city be included in the pilot plan and on Sunday, Ben-Eliezer said he was willing to consider expanding what he calls the "Gaza first" proposal to West Bank cities.
"The main obstacle (to peace) in our judgment is the existence of 12 separate Palestinian armed groups that don't take orders from the Palestinian Authority, the Palestinian leadership. Every time when there is an agenda they destroy it by bombs and fires," Peres said.