Israeli Defense Minister Shaul Mofaz met with Palestinian Interior Minister Nasser Yousef and Sunday and demanded that he finds the persons involved in the murder of an Israeli couple near Kissufim on Saturday night.

"If the Palestinian Authority fails to do so, Israel will," Mofaz said. "You must take steps against Hamas."

Israeli Prime Minister Ariel Sharon, responding to the killing, has threatened a harsh military response to Palestinian violence during and after Israel's pullout from the Gaza Strip.

Palestinian President Mahmoud Abbas condemned the killings as a violation of an informal seven-month-old truce and vowed that the Palestinian Authority would do everything to prevent attacks.

Mofaz and Yousef will meet again in the next few days to discuss the coordination of the disengagement. Mofaz promised U.S. Secretary of State Condoleezza Rice on Saturday that he would look into the Palestinians' requests to receive arms and munitions to strengthen the peacekeeping forces deployed in the Gaza Strip.

Mofaz and Yousef also discussed disengagement issues. Mofaz is due to meet Palestinian Civil Affairs Minister Mohammed Dahlan.

The prime minister's adviser, Dov Weissglas, is scheduled to leave for Washington at the beginning of next week for talks with senior administration officials in preparation for the disengagement. A senior PA official will also arrive in Washington at the same time.

American sources said Sunday that Rice would not visit the region again before the disengagement, but White House envoys Elliot Abrams and David Walsh are expected to return to Jerusalem.

Defense establishment heads on Sunday presented the operative plans of the pullout to Prime Minister Ariel Sharon. They outlined the principles, the detailed plans and the threats, and spoke of the planned deployment around and inside the Gaza Strip to prevent shooting from the Palestinian side. They also surveyed the deployment in the "inner circles," the forces expected to evacuate the settlers.

The discussion addressed ways to evacuate the settlers and their property, and how to transfer the responsibility for the territory to the PA.

UAE to build new town for Palestinians

The United Arab Emirates is to build a new town for Palestinians on the site of demolished Jewish settlements once Israel withdraws from the Gaza Strip, state news agency WAM has said.

The agency on Sunday said the development, to be named the Khalifa bin Zayed City after UAE President Sheikh Khalifa bin Zayed al-Nahayan, would house 30,000 to 40,000 Palestinians at a cost of at least 100 million US dollar.

It was not clear where the town would be built.

"This is a gift from his excellency to the brotherly Palestinian people in order to help ease their ordeal and offer them proper housing," WAM said.

Sheikh Khalifa gave orders to the department of agriculture and municipal affairs to carry out the project in cooperation with the United Nations Relief and Works Agency for Palestinian refugees (UNRWA).

Israel has said that next month it will begin the removal of 21 settlements in Gaza, built during Israel's occupation of the impoverished territory since 1967.

A new neighbourhood opened in the northern Gaza Strip earlier this year where the UAE spent some 55 million US dollar to house Palestinians whose homes had been destroyed by Israeli military actions during the Palestinian uprising raging since 2000.

Israel has agreed with the Palestinian Authority to demolish all the homes in its Gaza enclaves.

The UAE, an affluent trade and tourism hub in the Gulf, has no diplomatic relations with Israel and links formal ties to the establishment of a Palestinian state alongside Israel.

Peres: " Israel must divide Jerusalem to reach a peace deal with the Palestinians"

Israeli vice Premier Shimon Peres said on Sunday that Israel must divide Jerusalem and leave the West Bank city of Hebron, in order to reach a peace deal with the Palestinians.

He said he believes "there is no chance of reaching a conclusive agreement with the Palestinian Authority without giving back Hebron and dividing Jerusalem."

Israel is currently building a wall isolating Jerusalem from the its Arab neighborhoods, leaving around 55,000 Palestinian residents of Jerusalem suburbs outside of the city, and including at least 30,000 Jewish settlers to Jerusalem.

Peres, the Labor Party chairman, speaking to Israel Radio, also said the Gush Etzion settlement bloc, between Bethlehem and Hebron, would not be returned to the Palestinians under any future peace accord.

"No one believes Israel will give back Gush Etzion [under any future agreement with the Palestinians]," Peres added.

The Labor party has been Prime Minister Ariel Sharon's key political ally in his bid to implement the disengagement plan, and provided him safety net in several no-confidence votes in the Knesset.

Palestinians demand East Jerusalem to be the capitol of their future state. This includes the old city of Jerusalem, where the Aqsa Mosque and the Church of the Holy Sepulcher very sacred for the Palestinian, Muslims and Christians are located.

Many Palestinians, observers say, consider the Jerusalem issue as a red line that cannot be crossed.

PHOTO CAPTION

Israeli Defense Minister Shaul Mofaz (C) is escorted by bodyguards during his visit to the Palm Beach Hotel near Shirat Hayam settlement in the Gush Katif settlement bloc, Gaza Strip July 5, 2005. (REUTERS)