The Israeli Security Cabinet Sunday issued an ultimatum to Palestinian leader Yasser Arafat, giving him 48 hours to restore a crumbling cease-fire. At least 16 Palestinians have died in widespread clashes since the truce was announced last Wednesday.
The Israeli Security Cabinet decided to allow the Israeli Army to "renew its strategy of attacks" in two days' time, if Palestinians do not halt their attacks.
This would amount to giving the Israeli military the green light to renew offensive operations, including the targeted killing of Palestinian activists suspected of planning attacks against Jews.
The decision came following a review of the latest cease-fire accord between Israel and the Palestinians that has so far failed to take hold.
The truce was announced during talks last week between Palestinian leader Yasser Arafat and Israeli Foreign Minister Shimon Peres.
Since then Israeli troops have fought gun battles with Palestinians, in clashes marking the first anniversary of the Palestinian intifada, or uprising.
The latest incidents have dampened hopes that U.S. pressure might have persuaded the two sides to end their conflict.
Analysts say the United States regards a durable truce in the Middle East as vital to its efforts to secure Arab and Muslim support for a global coalition against terror.
Each side blames the other for the renewed fighting.
The Israeli Security Cabinet says Mr. Arafat has not lived up to his part of the bargain because he has not arrested a number of Palestinian militants on a list presented to him by Mr. Peres.
The Palestinian leadership denies ever receiving such a demand and said the Israeli government should have implemented its pledge to ease its military blockade against the West Bank and Gaza Strip that has crippled the Palestinian economy.
But Israeli government officials say that despite the recent violence, they are going ahead with the reopening of some roads in the Palestinian territories.
The Israeli officials say they are also planning to lift the closure around Jericho in the West Bank, in keeping with Israel's promise to ease restrictions in stages.