President Bill Clinton flew into the talks last night and convened an emergency meeting with Israeli Prime Minster Benjamin Netanyahu and the Palestinian leader, Yasser Arafat. America made a last-ditch effort to salvage something from five days of talks that have so far been fruitless.
Israel promptly withdrew from most of the negotiations, saying the attack showed the need for much-increased security guarantees from the Palestinians.
Israeli officials said they would talk only about their own security, which occupies only part of the agenda.
Mr Arafat condemned the grenade attack, saying it was "an attempt to sabotage the peace talks". And that certainly seemed to have been the effect. Mr Netanyahu decided to withdraw from most of the negotiations after consulting with Ariel Sharon, his Foreign Minister, and other top officials at the Wye Mills conference centre in rural Maryland where they are cloistered.
"After the consultations conducted in the kitchen cabinet it was decided Israel will demand the Palestinians fulfil all commitments so that there can be progress on other issues and there is a need to focus on issues of security and terror," a statement released by Mr Netanyahu's office said.
Security is the key unresolved aspect of a deal which would see Israel hand back an additional 13 per cent of the West Bank to Palestinians, in return for guarantees. The attack is being used by Israel as a means of increasing its leverage for a deal that would provide extra security. In the past 90 days there had been 10 attacks on Israelis, and Palestinians had not acted, the Israelis said.
"The Palestinian Authority is not doing anything to crack down on terrorist activity," said David Bar-Illan, a senior adviser to Mr Netanyahu.
Hanan Ashrawi, a Palestinian spokeswoman, hit out angrily at accusations that the Palestinians had done nothing. "Palestinian security is being violated daily ... and yet Israelis are willing to pursue a policy of extreme provocation and at the same time want the Palestinians to guarantee the security of every single Israeli," she said. "This is mission impossible."
Far from refusing to agree a deal on security for Israelis, Palestinians have been working on a plan put forward by the Central Intelligence Agency which would cover a number of different aspects, including the monitoring of arrests by the Palestinian Authority. But this does not go far enough for the Israelis.
"Reaching a secure, just and lasting peace between Israelis and Palestinians is the best way to ensure that terror has no future in the Middle East," said Mr Clinton. "The parties must consider the consequences of failure," he said. But US officials admitted that the attack had been a serious setback. It looked increasingly likely that at best, a partial agreement would result - not the full deal which America hoped would put the Middle East peace process back on track after 19 months of stalemate. At worst, the talks may disintegrate, plunging the region into chaos.Reuse content