Arafat meets Mubarak amid new peace drive

ALEXANDRIA, Egypt (Reuters) -- Palestinian leader Yasser Arafat met Egyptian President Hosni Mubarak on Wednesday before Middle East peace efforts shift to New York next week.

U.S. President Bill Clinton, who discussed the obstacles with Mubarak in Cairo on Tuesday, plans separate talks with Arafat and Israeli Prime Minister Ehud Barak on September 6, on the sidelines of the U.N. Millennium Summit in New York.

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Foreign Minister Amr Moussa told reporters that Arafat and Mubarak had discussed the flurry of meetings and the chances of narrowing gaps between Israel and the Palestinians.

"The discussion centred on one of the major problems, which is Jerusalem, but at the same time we went on to discuss other items because of the extreme importance and sensitivity of many of them," Moussa said, citing the fate of Palestinian refugees.

Clinton, now in the final months of his presidency, failed at a U.S.-brokered summit in Camp David last month to clinch agreement between Arafat and Barak on a final peace settlement.

That requires resolving the thorniest issues of the 52-year-old conflict, including borders, Jerusalem, refugees and the future of Jewish settlements in the West Bank.

"I don't claim that we have identical views on all points pertaining to the peace process," Moussa said when asked about reports of Egyptian and U.S. disagreements.

He rejected suggestions that Egypt was concentrating on the Islamic shrines in the old walled city at the expense of Palestinian claims to the rest of Arab East Jerusalem.

"These claims are baseless and these are distortions...There is no concession at all relating to Palestinian Arab East Jerusalem as the capital of the coming state," he said.

"Just as there is Israeli sovereignty over West Jerusalem, there has to be Palestinian sovereignty over East Jerusalem.

"This is the logic of justice and of U.N. Security Council Resolution 242," he said, referring to the world body's call for Israel and Arabs to trade land for peace after their 1967 war.

Moussa reiterated Egypt's support for a Palestinian state whenever it is proclaimed, whether unilaterally or not.

"A Palestinian state is a question of time. If it was announced today we would recognise it," Moussa said. "The important thing is that the declaration wins the acknowledgement of other countries from Europe and the whole world."

Arafat has in the past promised to declare statehood on September 13, with or without a peace settlement with Israel, but Palestinian officials have made clear the proclamation could be deferred if there was progress in negotiations.

Both sides have agreed to work towards a final peace deal by September 13. Clinton said on Tuesday time was running short.

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