Palestinians on Thursday cheered their parliament for forcing the resignation of Yasser Arafat's Cabinet, widely considered corrupt and inefficient, but many stopped short of criticizing the Palestinian leader himself. The toppling of the Cabinet was a major blow to Arafat's prestige. The Palestinian leader has been weakened in recent months by diminishing international support, Israeli blockades and widespread dissatisfaction at home with his rule.

However, the showdown with parliament did not directly endanger Arafat's political survival, and he appears poised for re-election in January.

As part of his wrangling with legislators Wednesday, Arafat set Jan. 20 as the day for presidential and parliamentary elections. However, there were uncertainties Thursday about whether the vote would take place.

Palestinian officials have said they could not conduct elections under Israeli occupation. Tayeb Abdel Rahim, an Arafat adviser, reiterated Thursday that ahead of the vote, Israeli troops have to withdraw to positions they held before the outbreak of Israeli-Palestinian fighting in Sept. 2000.

The international community "should act immediately to guarantee an Israeli withdrawal," Abdel Rahim said Thursday.

Israel says it can only withdraw troops if there is calm. "Let them (the Palestinians) stop terrorist activity, let them stop condoning terror, and then they can have elections," said Raanan Gissin, an adviser to Israeli Prime Minister Ariel Sharon. "The terror is preventing free elections."

Palestinian officials have said the United States has been seeking a delay in presidential elections to gain time for finding ways to sideline Arafat. One proposal is to have a newly elected parliament choose a prime minister with whom Arafat would have to share power. Arafat has resisted efforts to limit his authority.

Paul Patin, a spokesman for the U.S. Embassy in Tel Aviv, said the United States believes there was growing support among the Palestinians for a new leadership, "free from association with terror and the taint of corruption."

Patin added that elections in early 2003 will serve the Palestinians' interest.

However, if presidential elections take place Jan. 20, it is likely Arafat would be re-elected. His four challengers have little political clout. One is a local dissident, one a little-known lawyer and two live abroad, one in the United States and one in France.

Arafat has not commented in public on his defeat in parliament. A member of his inner circle, speaking on condition of anonymity, said Arafat was upset with parliament. The challenge to Arafat was the most serious since he returned from exile in 1994 to run the Palestinian Authority.

However, even the harshest Arafat critics blamed him only for condoning mismanagement, without holding him personally accountable.

Jibril Rajoub, recently fired by Arafat from his position as West Bank security chief, said he hoped "President Arafat ... will wake up and start to understand that the people around him are not satisfying the Palestinians' needs."

There was widespread satisfaction in the West Bank and Gaza over the resignation of the Cabinet.

Tarek Hamdan, 29, a pharmacist in Gaza City, said he was pleased parliament stood up to the government. "We were waiting for real change, and what took place yesterday, is the first step toward achieving this change," Hamdan said.

Arafat has two weeks to form a new Cabinet and present it to parliament for approval. The old Cabinet will continue working until then "because there's no government to be found in five minutes," said Arafat adviser Nabil Abu Rdeineh

Work on forming the new Cabinet would begin in the coming days, the adviser said, adding that Arafat "is still studying what happened yesterday."

Israeli officials were pleased with the apparent weakening of Arafat's position.

The chief of Israeli military intelligence, Maj. Gen. Aharon Zeevi-Farkash, said the events of Wednesday were "an earthquake in the Palestinian Authority" that would eventually lead to replacement of Arafat.

Palestinians have bristled at Israeli and American attempts to sideline Arafat, noting that he was elected leader in 1996. They charge that Israeli occupation of the West Bank and Gaza Strip is at the root of nearly two years of violence, which has been characterized by Palestinian attacks, including more than resistance bombings inside Israel, and harsh Israeli military retaliation.

In another developments:

Israeli troops demolished two homes in the Gaza Strip, making 42 people homeless, witnesses said. One house belonged to Osama Hales, a suspected Islamic activist killed by Israeli troops eight months ago. The second, in the Rafah refugee camp, was razed inadvertently during a search for weapons smugglers, the occupation army said.

PHOTO CAPTION

Palestinian General-Secretary of the Presidency Tayyeb Abdel Rahim announces the resignation of the Palestinian Cabinet following a Palestinian Legislative Council (PLC) session in Ramallah, Wednesday, Sept. 11, 2002. The Palestinian Cabinet resigned Wednesday as a result of a showdown between Yasser Arafat and parliament, the most serious challenge to the Palestnian leader since he returned from exile in 1994. (AP Photo/Nasser N