The report of the concession came on the eve of a meeting today in Cairo between the Israeli Foreign Minister, Shimon Peres, and Mahmoud Abbas, the top aide to Yasser Arafat, chairman of the Palestine Liberation Organisation (PLO). They are to make a third attempt in nine days to reach a compromise to clear the way for a Rabin-Arafat summit and the start of Israeli withdrawal.
Gad Ben-Ari, Mr Rabin's spokesman, said that 'while we strongly hope that there will be significant progress (today), we will give it additional time if needed'.
Cabinet ministers, speaking after their weekly Sunday meeting, said Israel would insist on keeping control over border crossings from Egypt and Jordan into Jericho and the Gaza Strip, the two autonomous regions that are to be run by the PLO.
The size of the Jericho region and control over the border crossings have been the two main sticking points in the negotiations on implementing Palestinian autonomy.
Mr Rabin has said that even if the implementation agreement was signed three or four weeks after the original 13 December deadline, the two sides could still meet the 13 April target date for concluding Israeli troop withdrawal from Gaza and Jericho.
However, Mr Rabin told the cabinet that Israel will not agree to let the autonomous region reach the Dead Sea to the south or include any Jewish settlements, said the Trade Minister, Micha Harish.
The newspaper Ha'aretz said Mr Peres had offered the Palestinians a compromise under which the area between the autonomous region and the Dead Sea would be used for joint Israeli-Palestinian tourism and business ventures. It quoted Nissim Zvili, a leading figure in Mr Rabin's Labour Party, as saying that Mr Arafat leaned toward accepting the offer. Mr Zvili met Mr Arafat last week.
On the border crossings, Mr Harish said Israel would insist on control over security, while all other issues, such as symbols, were open to negotiations. Ha'aretz said Israel wants to check everyone coming in. The PLO is ready to give Israel a veto over entries but wants a low-key Israeli presence, such as Israeli border control officials hidden behind two-way mirrors, it said.
Also yesterday, General Amnon Shahak, a top Israeli negotiator, met Jibril Rajoub and Mohammed Dahlan, two top Arafat aides, in Rome to negotiate the return of Palestinians deported by Israel since the 1967 Middle East war. Reports said that Israel was willing to permit 50 deportees affiliated with Mr Arafat's Fatah faction to return, but that the PLO insisted on more than 100 as a first step.
Chaim Ramon, the Health Minister, said yesterday that agreement on implementing Palestinian self-rule may be reached in a week's time, AFP reports. 'It is possible we will reach an agreement with the PLO in a week to ten days,' he said after the cabinet meeting.
In Tunis, the PLO executive committee on Saturday accused Israel of violating the deal by failing to stop Jews from building new settlements in the occupied territories. The committee, chaired by Mr Arafat, also said Israel was expropriating thousands of hectares of Palestinian land west of Ramallah in the West Bank, and around east Jerusalem.