HIGHLIGHTSEreqat Was Addressing a News Conference at a Seminar on the Spanish Island of Majorca|*|Ereqat Expects Sharon to Take Advantage of Attack on Iraq and Destroy Palestinian Authority, Inflict 'Physical Harm' on Arafat & to Fully Reoccupy West Bank & Gaza Strip|*|Peres Doesn't Share Ereqat's Pessimism & Appears to Reject Ereqat's Call for International Monitors on the Ground to Curtail Right Wing Extremism Under Sharon|*|In Cairo, President Mubarak Appeared to Share Peres' Optimism: Thro' a Video Link, the President was Addressing a Rally Marking the 9th Anniversary of Rabin's Assassination in Tel Aviv|*|
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STORY: A top Palestinian official said on Saturday the Middle East peace process would pay a heavy price if Israeli Prime Minister Ariel Sharon forms a right-wing government after the fall of the country's coalition.

"Israel is about to form the most extremist government in its history," chief Palestinian negotiator Saeb Erekat told a news conference at a seminar on the Spanish island of Majorca.

"I'm afraid the price will be at the expense of the peace process, at the expense of the Palestinian people. It will mean more settlement activity, more land confiscation," he said.

Erekat's comments came as Sharon tried to form a narrow right-wing coalition after Labour party ministers resigned this week in a dispute over funding for Jewish settlements.

Erekat said he would not be surprised if Sharon took advantage of a possible U.S. attack on Iraq to fully reoccupy the Gaza Strip and West Bank, destroy the Palestinian Authority and physically harm Palestinian President Yasser Arafat.

He said Israelis and Palestinians needed the help of a third party more than ever before and also called for the United States, European Union, Russia and the United Nations to put monitors on the ground in the region.

But Israel's outgoing Foreign Minister Shimon Peres, one of six Labour ministers who have resigned and whose term in the cabinet ends on Saturday evening, took a more optimistic line.

Peres, who is also at the Formentor Forum in Spain, said peace in the Middle East could be closer than people thought.

"In the spite of all the difficulties, I do believe that the conflict is solvable and if we don't lose the opportunity and our patience, we are within reach of a peace agreement," he said.

Peres said he believed this because there was a rough understanding of the nature of a solution and, for the first time in Israeli history, he said, there was a clear majority in favor of the establishment of a Palestinian state.

The annual "Formentor Forum," which brings politicians, business executives, academics and journalists to a secluded hotel on a scenic Majorca inlet to discuss international issues, served as an opportunity this year for Israeli-Palestinian contacts.

Peres and Israeli Parliament speaker Avraham Burg met Erekat and former Palestinian Authority national security adviser Mohammed Dahalan on the sidelines of the meeting.

Peres said he had no intention of leaving public life despite his resignation and would continue to work for peace.

Peres said narrow governments in Israel were almost impossible to manage and he believed new elections could be held before they fall due in October next year. He said Labour stood a chance in the elections if it campaigned on the right issues.

MUBARAK PRAISES RABIN'S LEGACY

In Cairo, Egyptian President Hosni Mubarak recalled Yitzhak Rabin as a "great leader" Saturday and said Middle East peace was still possible.

The president was speaking by video link to 100,000 people in Tel Aviv.

The Tel Aviv rally was held to mark the seventh anniversary of the assassination of Rabin, the prime minister who signed landmark peace accords with Yasser Arafat in 1993.

"Your meeting today in this place specially, despite the pains and difficult circumstances that resulted from recent events, sends a strong message to the world that the passing of Rabin does not mean the end of peace," said Mubarak. In 1979, Egypt became the first Arab state to sign a peace treaty with Israel.

It was the first time that Mubarak took part in the annual rally held to mark the day of Rabin's slaying at the hands of a young Jewish extremist. Mubarak, who took office in Egypt 21 years ago, visited Israel once to attend Rabin's funeral in 1995.

The Egyptian leader drew a parallel between Rabin and his own predecessor Anwar Sadat, saying both men lost their lives to "forces of deception."

Mubarak appealed to moderates and "friends of Rabin" in Israel to end the current Israeli-Palestinian fighting, saying that reviving the faltering Mideast peace process was still possible

PHOTO CAPTION

An Israeli occupation soldier takes aim during clashes with Palestinian stone throwers in the West Bank city of Hebron, November 2, 2002. A top Palestinian official said on Saturday the Middle East peace process would pay a heavy price if Israeli Prime Minister Ariel Sharon forms a right-wing government after the fall of the country's coalition. (Nayef Hashlamoun/Reut