Substantive Israeli-Palestinian peace talks broke down in March 1997, after Israel began clearing land at Har Homah on the southern edge of Jerusalem for a 6,500-home Jewish neighbourhood. The Palestinians argued that Israel was establishing a new settlement on occupied West Bank land. Israel countered that the territory had been bought from private Arabs and was part of Jerusalem.

US-led efforts to revitalise the talks have faltered over Israel's refusal to commit itself to ceasing new West Bank settlements. No new settlements have been established recently, but there are fears that some may soon be sanctioned. The settler population is now estimated at over 150,000.

Although the Israeli government withdrew its forces from 80 per cent of the city of Hebron in January 1997, it has failed to carry out any of the three further West Bank withdrawals to which it committed itself as part of the Hebron accord.

Mr Netanyahu says further West Bank withdrawals are conditional on Palestinian reciprocity. Specifically, he is demanding that:

the PLO approves a new covenant, to replace the original one calling for an armed struggle to eliminate Israel.

the Palestinian Authority extradites to Israel Palestinians suspected of involvement in murderous attacks on Israelis

the Palestinian police and security forces be reduced by 25,000 to the 20,000 specified in the peace accords

the Palestinian Authority disarms Hamas and other Islamic extremists and steps up security operations to prevent future attacks on Israeli targets.

Even if all these can be resolved, the most complex issues relating to a permanent Israeli-Palestinian settlement have yet to be tackled in negotiations. These include the question of the permanent status of Jerusalem, the fate of the settlements, the final borders and status of the Palestinian territory, and the right of return of Palestinian refugees.