There were also signs yesterday that Israel was moving closer towards recognition of the Palestine Liberation Organisation, with confirmation that Shimon Peres, the Israeli Foreign Minister, has held unprecedented secret talks with leading PLO officials.
During the talks, agreement 'in principle' on the new peace plan was struck.
Today Yitzhak Rabin, the Israeli Prime Minister, will chair an emergency cabinet meeting in Jerusalem to discuss whether Israel should take this new track, and to gauge opinion on closer PLO links.
At the weekend Yasser Arafat, the chairman of the PLO, who originally proposed the 'Gaza-Jericho' idea, won the support of his executive committee in Tunis.
As the eleventh round of Middle East negotiations opens tomorrow in Washington, the interests of Mr Rabin and Mr Arafat have begun to converge: both urgently need a deal, and have been looking for new initiatives.
In recent weeks Mr Arafat has seen his support among Palestinians ebbing away with despair over the peace process deadlock and with the PLO suffering a financial crisis.
At the same time Mr Rabin, who promised Palestinian autonomy within six to nine months when he was elected 14 months ago, needs progress soon to report to his electorate.
The aim of the talks until now has been to set up autonomy for all Palestinians in the occupied territories as a first stage, but no agreements were reached.
As a result peace talks with Lebanon, Syria and Jordan, which aspire to a comprehensive settlement in the region, have also stalled.
However, despite the sudden new wave of expectation, the Palestinian and Israeli interpretations of the so-called 'Gaza-Jericho First' plan remain so far apart that detailed discussion may well yet produce irreconcilable differences, and opposition muscles are being flexed.
Jewish settlers yesterday warned of 'civil war'. Officials on both sides admit that the preliminary agreement is only an 'outline'.
The trial areas were chosen because Israel has long wanted to be rid of the Gaza Strip and because Jericho is strategically important for the Palestinians, being close to the Allenby Bridge, the West Bank's only link to Jordan.
The theory is that 'fast-track' Palestinian control would be carried out there, with the rest of the West Bank proceeding more slowly, before a final settlement.
What Israel envisages conceding in Gaza and Jericho remains limited, however, with vague promises of limited withdrawal and continuing Israeli control over Jewish settlements.
Mr Rabin said yesterday that there was no question of setting any precedent for a Palestinian state.
What the Palestinians propose for the enclaves is:
De facto Palestinian sovereignty with the immediate withdrawal of Israeli troops and administrators. In Jericho this would mean Israel withdrawing westwards to an unspecified new boundary, handing over to Palestinians control of the Allenby Bridge.
Security would be handled by a tripartite body of Palestinians, Israelis and international or United Nations forces.
Palestinians would take over all administration and Mr Arafat and other PLO exiles would be able to return to the area from where they would directly conduct negotiations on peace for the other areas. In a final settlement elections would be held in all the occupied territories.
The Jewish settlements in Gaza would come under Palestinian control.
Some leaders on both sides have spoken euphorically about the plan. Bassam abu Sharif, an adviser to Mr Arafat, said yesterday: 'We feel five minutes away from the first steps on the way to establishing peace in the Middle East.'
However, indicating how guarded the new plan has been, the head of the Israeli peace delegation, Elyakim Rubenstein, threatened to resign yesterday, saying he had not been informed of Israel's move.
The Israeli and Palestinian public are confused. On the Palestinian side there are fears that the PLO has sold out on its original aim in the talks: a Palestinian state over the whole of the occupied territories.
Benjamin Netanyahu, the leader of Israel's Likud opposition, yesterday accused Mr Rabin of allowing the PLO to set up a hostile headquarters
'15 minutes from Jerusalem', and vowed to bring down the government.
King Hussein of Jordan, fearful that his influence in the talks is diminishing, has also questioned the idea.
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