HIGHLIGHTS: Israeli Official Says Meeting Postponed for Technical Reasons||Occupation Forces Intercept Car Packed with Explosives South of Qalqilya||Israeli Defense Minister to Alexandria for Talks with Mubarak Monday|| STORY: Israel said on Saturday it had delayed indefinitely a meeting with Palestinian ministers to ease security and economic restrictions on Palestinians, in a setback to efforts aimed at restoring relations.

An Israeli political source said the talks, due to take place between an Israeli and Palestinian delegation later in the day, had been called off due to "technical" reasons and because Israel needed to be sure Palestinians were undertaking reforms.

"There needs to be more consultation and preparation. We need to be clear the (Palestinian) Authority is making reforms and that we are not giving additional incentive to (Palestinian President Yasser Arafat to do nothing," the source said.

There was no immediate comment from Palestinian officials, who agreed with the Israelis on Tuesday to hold series meetings after breaking the ice at their first high-level talks in months.

Washington has ostracized Arafat in recent weeks and made clear it wants the Palestinian leader out of power.

But U.S. national security adviser Condoleezza Rice said on Friday that the Palestinian leader should be removed only through elections rather than being ousted by force.

OCCUPATION FORCES INTERCEPT CAR PACKED WITH EXPLOSIVES SOUTH OF QALQILYA

The Israeli occupation army is now deployed in seven Palestinian-ruled cities, including Qalqilya where an occupation army spokeswoman said occupation soldiers had discovered a car packed with explosives trying to pass into Israel at a checkpoint south of the city.

She said the Palestinians in the vehicle had fled as occupation soldiers stopped the car and that the occupation soldiers had arrested six Palestinians in overnight activities near Hebron and Nablus.

Palestinian sources said occupation troops had detained a suspected militant from the Islamic Jihad group in Bethlehem.   (Read photo caption)

Some 500 mourners in Jenin marched in the funeral of Imad Abu Zahra, 35, a freelance photographer who died after being shot earlier in the week when Israel's occupation army unexpectedly reinstated a curfew in the West Bank city. Hospital officials said Abu Zahra, 35, died on Friday after he was shot the previous day as the army re-imposed the curfew. A Palestinian press photographer was also wounded.

ISRAEL'S DEFENCE MINISTER TO ALEXANDRIA FOR TALKS WITH MUBARAK MONDAY

In another sign of stepped up diplomacy, Israel said that Defense Minister Binyamin Ben-Eliezer would discuss "political, security and regional issues" with Egyptian President Hosni Mubarak in Alexandria, Egypt, on Monday.

PHOTO CAPTION

An Israeli tank takes position in the Madbasse square in the West Bank city of Bethlehem during a curfew on July 12, 2002. Israeli forces shot dead a Palestinian policeman and a 13-year-old boy in the Gaza Strip, and a photographer died of his wounds a day after troops shot him in the West Bank, Palestinian security sources said. (Magnus Johansson/Reuter