Israeli Prime Minister Benjamin Netanyahu on Wednesday rebuffed Secretary of State Madeleine Albright's appeal to ease economic restrictions on the West Bank and Gaza Strip to encourage the Palestinian Authority to crack down on terrorism.
"As long as the Palestinian Authority doesn't make a vigorous effort to fight terrorism and dismantle their infrastructure, we will not go very far," Netanyahu told a news conference with Albright at his side after almost two hours of meetings.
Albright agreed with Netanyahu that Palestinian Authority President Yasser Arafat must do far more to prevent militant groups such as Hamas and Islamic Jihad from using Palestinian territory to stage attacks on Israel. But she said Israel also needs to do more to give the Palestinians a real stake in the peace process.
After asserting that security cooperation must be improved, Albright said: "Clearly, Israel also has a responsibility to shape an environment that allows that [peace] process to succeed."
She said Israel must "refrain from actions that erode trust."
A senior U.S. official said the exchanges at the news conference accurately reflected the discussions that Albright, Netanyahu and their top aides had in private.
But it is unusual for two such dignitaries to disagree so publicly, regardless of how much they may differ in private meetings.
The official said Netanyahu did not offer any concession that Albright could take to Arafat when she meets the Palestinian leader today in the West Bank town of Ramallah.
It is clear that Albright's meeting with Arafat will be even more tense than her talks with Netanyahu. Albright said the Palestinians, despite the arrest of nearly 200 suspected members of extremist Islamic groups early Wednesday, have not done enough to stop assaults on Israelis, including two deadly suicide bombing attacks on a Jerusalem market and mall during the past six weeks.
About 85 suspects remained jailed Wednesday evening, according to Palestinian security and political officials.
Netanyahu scornfully said the arrests were "sardines" that left the "sharks" untouched.
The senior U.S. official said Albright urged Netanyahu to release Palestinian tax money that Israel impounded after the July 30 bombing of a Jerusalem produce market and end the closures of Gaza and the West Bank. The closures make it impossible for Palestinians to reach jobs in Israel and have severely damaged the Palestinian economy.
According to the official, Albright said these steps should be taken "unilaterally" by Israel to improve the political climate.
Albright also called on Israel and the Palestinians to meet their remaining obligations under the 1993 peace agreements that were negotiated in Oslo and signed on the White House lawn.
Those accords require the Palestinians to crack down on terrorists, while Israel is required to transfer additional territory to Palestinian control, allow the Palestinians to open an airport and a seaport and take other steps.
The senior U.S. official said Albright told Netanyahu that Israel must ease its hard-line approach if it hopes to make real progress against terrorism.
"The secretary did make clear there was a limit to what one could reasonably expect Arafat to do in the absence of some encouragement," the official said.
Marwan Kanafani, a Palestinian legislator and close advisor to Arafat, said: "We are very disturbed that the secretary embraced completely the Israeli position on the security issue. She should have waited to listen to our point of view, that security is just one aspect of the [peace] agreements."
But Kanafani said the Palestinians "did not fail to notice" that Albright also touched on the need for implementation of the existing accords between Israel and the Palestinians, which he said tops the list of concerns Arafat plans to raise with Albright.
Earlier in the day, Israeli war hero Ezer Weizman, who now holds the largely ceremonial post of president, told Albright that she and other U.S. officials may soon have to "knock heads" to force Israel and the Palestinians to resume peace talks, a U.S. official said.
The official said Weizman did not say whose heads should be knocked, but he has long been a political opponent of Netanyahu.
Albright also visited Yad Vashem, the Israeli memorial to the 6 million Jews killed in the Holocaust.
Although she made no reference to her own Jewish roots, Albright said that "we must never allow ourselves to be at peace with the Holocaust or to believe we have somehow mastered its lessons."
Museum authorities gave Albright 60 pages of deportation records, including the names of several people who appear to be members of her family.
Albright earlier received documents showing that her father's mother and father perished in the Holocaust.
Albright's parents converted to Roman Catholicism early in the war. The secretary of State did not learn of her Jewish heritage until earlier this year.
Times staff writer Rebecca Trounson contributed to this report.