Israeli Prime Minister Ariel Sharon began a second term on Friday at the head of a hawkish coalition that includes fierce opponents of a Palestinian state and staunch supporters of Jewish settlement on occupied land. Sharon made clear Israel would not rush into peacemaking when he presented his government to parliament, a day after President Bush said he would press for an Israeli-Palestinian accord after any war in Iraq.

While Sharon's rightist coalition could complicate international peace efforts, a U.N. envoy said on Friday Palestinian President Yasser Arafat had pledged to name the Palestinian Authority's first prime minister next week.

The appointment would be a step toward meeting U.S. and European demands to Palestinians to reform the Authority, root out corruption and end violence in a 29-month-old uprising for statehood.

Terje Roed-Larsen, U.N. envoy to the Middle East, said after meeting Arafat that the Palestinian leader pledged to announce his nominee for premier and seek approval for the appointment at a Palestinian Legislative Council session on March 8.

Arafat Must Be Replaced

Sharon, first elected Israel's prime minister in February 2001, said in his speech to parliament that Arafat must be replaced.

He ruled out a return of Palestinian refugees to homes they fled during the 1948 Middle East war, a major Palestinian demand in peace negotiations.

Sharon, 75, repeated his position that Palestinians waging the uprising must stop "incitement and terror" and implement deep democratic reforms before any peace talks could resume.

But he also told lawmakers: "The people of Israel seek peace and I am convinced that for real peace there is a willingness for painful concessions."

Palestinians Skeptical

The Palestinian Authority predicted that Sharon's new government would try to undermine attempts by an international quartet of mediators -- the United States, United Nations, European Union and Russia -- to push their "roadmap" for peace.

Palestinian cabinet minister Saeb Erekat told Reuters: "It is a government that will serve settlement activities and undermine the roadmap plan."

He was referring to a phased peace proposal drafted by the mediation quartet that aims to calm hostilities and sets as its ultimate goal the establishment of a Palestinian state in 2005 on condition Israel's security is safeguarded.

Hamas Warns Israel

Abdel-Aziz Rantissi, a top official of the militant Islamic group Hamas that has killed dozens of Israelis in resistance bombings, warned Sharon's new government: "If they escalate the aggression we will escalate the resistance."

An opinion poll published in Israel's Maariv newspaper on Friday showed only a quarter of Israelis believed Sharon's coalition could improve peace prospects or heal an economy reeling from the effects of more than two years of violence.

A further 23 percent said they expected the economic slump would worsen, despite markets being buoyed by Sharon's naming of former Foreign Minister Benjamin Netanyahu as finance minister

PHOTO CAPTION

Palestinians set fire to an Israeli flag during a rally at the Jabaliya refugee camp, northern Gaza Strip, February 28, 2003. (Jose Manuel Ribeiro/Re