Palestinian leaders yesterday flatly rejected a new peace offer from Israel's outgoing Prime Minister, Mr Ehud Barak, in which, for the first time, he agreed to recognise independent Palestinian statehood without demanding that, in return, the Palestinians formally declare an "end to the conflict" with Israel.
The immediate Palestinian rejection of the Israeli offer reflected how dramatically the past two months of violence in the West Bank and Gaza have altered the balance of confidence, albeit not the balance of power, between the two sides. In July, the US and many other world leaders branded the Palestinian President, Mr Yasser Arafat, as unreasonable for walking away from Mr Barak's various peace proposals.
Now, after the deaths of some 250 Palestinians and 30 Israelis in the continuing violence, Israel stands accused by many in the international community of using excessive force against the Palestinians, Mr Arafat is riding a wave of domestic popularity and Mr Barak has been forced to call a general election two years ahead of schedule.
A Palestinian teenager was killed near Bethlehem yesterday as the violence continued unabated. Further clashes are in prospect for today, the first Friday of the Muslim holy month of Ramadan.
Outlining details of his new offer, Mr Barak indicated that he was willing to recognise an independent Palestine and immediately transfer another 10 per cent of the West Bank to Mr Arafat's control - giving the new state full or partial rule over some 50 per cent of the West Bank - if Mr Arafat was prepared to see Israeli sovereignty extended to several "blocs of Jewish settlements".
The other "end of conflict" issues, including the fate of the rest of the West Bank, Jerusalem and Palestinian refugee rights, could be negotiated at a later stage, he suggested.
Soon afterwards, however, an aide to Mr Arafat, Mr Nabil Abu Radaineh, said the offer was unacceptable, as were "any partial or interim solutions". All issues, including Jerusalem and refugee rights, he said, had to be addressed in any new deal.
Mr Barak is desperate to reach an accord with Mr Arafat, aware that this represents his only hope of securing re-election, and has privately urged the Clinton administration to use its final weeks to help to broker a breakthrough. Egypt is also involved in the effort, and may try to arrange a Barak-Arafat meeting next week.
But Israeli right-wing opposition politicians are drafting legislation designed to prevent Mr Barak from so much as initialling a peace accord before the elections, arguing that, since he has lost his parliamentary majority, he has no mandate for peacemaking.
Mr Barak is also under threat from within his own One Israel party, with several potential leadership rivals boycotting a party conference he had organised yesterday. In his address, the Prime Minister pointedly reminded his colleagues of the "need to work together" to prevail in the elections, tentatively scheduled for next spring.
Mr Ariel Sharon, the Likud opposition leader, also held a party conference yesterday, and confidently asserted that, under his leadership, the Likud would oust Mr Barak. However, Mr Sharon is likely to be ousted himself - by Mr Benjamin Netanyahu, the former prime minister. Interviewed on a trip to the US yesterday, Mr Netanyahu said he would wait until returning to Israel before announcing whether he would make a keenly anticipated return to politics.