Two dead in West Bank shootout

Peres and Arafat held informal peace talks

JENIN, West Bank (CNN) -- Two Palestinians were killed Sunday in a shootout with Israeli soldiers near the West Bank town of Jenin, Israel Defense Forces officials have told CNN.

Several Palestinians opened fire on the soldiers when they approached them on the road between two Israeli settlements, IDF said.

Explosives were found with the bodies of the two men, it said. Israeli officials said they believe the two were attempting to plant the explosives on the road between two Israeli settlements outside of Jenin. There was no confirmation of the incident from Palestinian authorities.

Meanwhile, Palestinian leader Yasser Arafat and Israeli Foreign Minister Shimon Peres have left Lisbon, Portugal, where they held informal talks during a conference of socialist leaders.

The two met on Saturday night and discussed the Middle East conflict for more than two hours, officials said. They met for three hours on Friday night.

Arafat praised Peres as a "peace partner," saying: "We have to thank him from all our hearts for his efforts."

"I think it was a good occasion to exchange views informally in a rather agreeable atmosphere," Peres said of their meeting.

Speaking separately, the two leaders disagreed on the use of international observers to monitor a test cease-fire.

Arafat called for the deployment of foreign monitors in the conflict areas to oversee a tentative cease-fire brokered by CIA director George Tenet.

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He said: "We need your voice to send international observers, without delay, to the Palestinian territory. I would like to ask why does the government of Israel reject the dispatching of international observers to consolidate and protect the cease-fire."

Peres said: "The only ingredient necessary to get the locomotive of peace on its way, in our view, is security, not occupation. You have security, you'll have freedom.

"A good neighbor is better than a good gun, and we are looking for a good neighbor."

Speaking later to The Associated Press, Peres said Israel's position was that no outside observers would be allowed until the fighting ends.

"Observers can observe once you have peace," he said. "They cannot observe a lack of peace," AP reported.

It was the first time Arafat met a member of Sharon's government since Israeli elections last February.

"The most important thing is to follow up what has been agreed upon," Arafat said before the two met on Friday.

"And we are following and I have declared our approval for the Mitchell report, for the Egyptian and Jordanian initiative, for the declaration which had been declared after the meeting between President Bush and the European leadership in Sweden recently," he said.

The Mitchell Committee report, which both sides have pledged to honour, calls for the Palestinians to crack down on terrorism and for the Israelis to freeze settlement activities.

Both sides agreed in principle to U.S. Secretary of State Colin Powell's call Thursday for seven straight days without violence -- to be followed by a six-week cooling off period when the two sides would begin to implement confidence building measures. But it is not clear when that week would begin.

Palestinian chief negotiator Saeb Erakat called on the Americans to implement the Mitchell report in the next five days.

"If we don't see the timeline introduced by the Americans for the implementation of the Mitchell Report ... in the next five days, I believe we're going to be in deep trouble," he told CNN.