FORMENTOR, Spain -- Israeli Foreign Minister Shimon Peres and Palestinian President Yasser Arafat have met at an economic conference at a secluded Spanish island resort but were not planning formal talks.
Aides poured cold water on speculation Peres and Arafat would hold their first formal meeting since reaffirming a cease-fire on September 26 that has since been undermined by a fresh cycle of tit-for-tat fighting.
Israeli forces are still holding on to Palestinian-ruled areas in the northern West Bank, raided in a sweeping military operation after radical Palestinians assassinated a far-right cabinet minister two weeks ago.
Israeli newspapers said the army had intended to withdraw from parts of the Palestinian-ruled city of Ramallah early next week. The possible pullout could be shelved, however, following the killing of an Israeli by Palestinian gunmen near Ramallah on Friday.
Palestinian security sources said that Israeli troops had also surrounded two Palestinian-ruled villages near the West Bank town of Jenin while two airforce helicopters hovered overhead and flares lit up the sky.
Israeli military sources told Reuters that the army was searching for Palestinian militants who had set off an explosive device in the area earlier. No one was hurt in the blast.
U.S. CRITICIZES PALESTINIANS
The United States which has been stinging in its criticism of Israel's military operations in the West Bank for fear it could undermine Arab support for its strikes on Afghanistan, turned its attention to the Palestinians.
Deputy Assistant Secretary of State David Satterfield said a 13-month old Palestinian revolt against Israeli occupation had turned into "an ongoing process of calculated terror and escalation."
Satterfield said Arafat was not doing enough to quash militants planning attacks against Israelis.
"Good words, excellent rhetoric, nice instructions sent but very little in terms of confronting those elements whose interests are not in advancing the cause of the Palestinian people," Satterfield said.
"In the absence of such concrete steps it is very difficult to establish the credibility necessary to advance a meaningful political process," he added.
PERES, ARAFAT SHAKE HANDS
Peres and Arafat shook hands Friday and ate lunch with Egyptian President Hosni Mubarak and Spanish Prime Minister Jose Maria Aznar at an economic conference on the Spanish holiday island of Majorca.
But the pair were not expected to formally meet, officials said.
"We said they would not hold a meeting and they will not hold a meeting," Peres's spokesman Yoram Dori said.
Peres told Mubarak at a private meeting Friday that Israel would not withdraw from Palestinian-ruled areas taken recently until Arafat acted decisively against militants, Dori said.
The Egyptian leader had earlier slammed Israel in a speech, accusing it of pushing Palestinians to commit acts of violence due to its crippling military blockades of the West Bank and Gaza Strip and its recent incursions in the West Bank.
European Union Middle East envoy Miguel Angel Moratinos said even without a one-on-one meeting, the conference gave Peres and Arafat an opportunity to conduct a dialogue to "move forward the peace process."
Moratinos told Reuters he was buoyed by Prime Minister Ariel Sharon's recent comments on his intention to set up a peace negotiating team.
"They are very encouraging comments," Moratinos said. "It's a sign the Israeli government is ready to engage politically once the conditions are met," he told Reuters.
Peres and Sharon formed a national unity government after elections last year, but have often been at odds over the handling of the Middle East conflict, in which at least 688 Palestinians and 182 Israelis have been killed in 13 months.
