President Clinton returned for the fourth time to the Middle East summit near Washington as the grenade attack in Beersheba threatened to wreck any chance of success.
The President condemned the attack before leaving the White House and said it had become "a complicating factor" in the talks which have been going on since last Thursday at the Wye Plantation in eastern Maryland.
The Israelis, who had earlier indicated that they were prepared to stay at the summit as long as progress was being made, took a different view after the news of the attack. A spokesman for the Israeli Prime Minister, Mr Benjamin Netanyahu, said the talks would end this morning. The spokesman said in a TV interview that the attack "affects the spirit of the talks as well as their content. And if you're asking if the Prime Minister intends to move up his return to Israel, I can say with certainty that the delegation doesn't intend to stay here indefinitely."
Mr Netanyahu and the Palestinian leader, Mr Yasser Arafat, issued a joint statement pledging to co-operate in the fight against terrorism, but increased emphasis by the Israelis on the security issues at the summit is said to have angered the Palestinians.
The Israelis were reported to have suspended all but security negotiations following the news of the grenade attack which injured 64 people, many of them soldiers.
Mr Netanyahu, in a statement in Hebrew, said: "If the Palestinians do not fulfil their commitments on security, an agreement is impossible. The Palestinian Authority must fight terrorism . . . and I am insisting on it at the summit."
A Palestinian official, Mr Yasser Abed Rabbo, called the Israeli suspension of the non-security part of the negotiations "cheap blackmail".
Earlier on ABC's Good Morning America, Ms Hanan Asrawi of the Palestine Legislative Council said: "Palestinian security is being violated daily . . . and yet Israel is willing to pursue a policy of extreme provocation and at the same time wants the Palestinians to guarantee the security of every single Israeli. This is mission impossible."
President Clinton tried to ease the tension at the summit by inviting the two leaders to lunch. Earlier he said: "Ultimately only the parties themselves can bridge their differences and put their people on a more hopeful course."
In their joint statement Mr Netanyahu and Mr Arafat said: "We agree to intensify our efforts to achieve agreement that will lead to a secure and lasting peace." The leaders continued: "We agree not to give in to the efforts of extremists to destroy the hope for peace and security for both our peoples. We are determined to do everything possible to defeat terror."
Even before the news of the grenade attack, the summit had got bogged down on the security issue and President Clinton had been unable to bring the two sides closer in spite of remaining at the Wye Plantation until 3 a.m. yesterday morning and going from one leader to the other with various compromise proposals.
He also had a separate meeting with the hardline Israeli Foreign Minister, Mr Ariel Sharon, who joined the talks on Sunday.
The Israelis are believed to have agreed to hand over 13 per cent of West Bank territory now occupied by their troops, but their security demands, and the reciprocal conditions laid down by the Palestinians, could not be bridged by the time Mr Clinton returned to the White House early yesterday. The Israelis were demanding the extradition of about 30 Palestinians they accuse of terrorist acts and refused to accept a US-Palestinian compromise whereby they would be dealt with in West Bank courts with the CIA playing a role as to the justification for the Israeli charges.
The Palestinians for their part were refusing to accept a partial agreement on the handing over of land if it was not accompanied by an Israeli commitment to make a third cession of occupied territory and to hand over the 3,500 Palestinian prisoners held in Israel.