Israeli Foreign Minister Shimon Peres has said the Middle East is embroiled in an extremely grave crisis and that both sides in the Israeli-Palestinian conflict are currently in a "no win" situation. Mr. Peres says the Palestinians must be offered what he called a political horizon in an effort to achieve a cease-fire and return to peace negotiations.

Speaking to reporters during one of the bloodiest periods of the Palestinian uprising against Israeli occupation, Foreign Minister Peres said there is no way to stop the violence unless the Palestinians are offered specific reasons to observe a truce.

"You cannot stop fire with fire. There must be a political, an economic and a psychological element to this effort. I think we have to at least paint a political horizon, what will happen if a cease-fire will be achieved, where are we going, what should be done," Mr. Peres said.

Mr. Peres has said a plan he has been discussing with the speaker of the Palestinian Legislative Council, Ahmed Qureia, could offer a way out of the conflict that has now entered its 18th month.

The proposal, which has found little support in the current Israeli government, calls for an immediate cease-fire, confidence-building measures, and recognition of a Palestinian state based on territories currently under full or partial Palestinian control.

The plan calls for peace negotiations to commence eight weeks after the truce, with the goal of reaching a permanent agreement within one-year.

Mr. Peres says while the Israeli government has yet to approve his proposal, polls show 60 percent of the Israeli public supports it.

The foreign minister, who shared the Nobel Peace Prize in 1994 as one of the architects of the Oslo accords with the Palestinians, said other new proposals also deserve attention.

He pointed to an initiative by Saudi Crown Prince Abdullah that offers Israel normal relations with the Arab world in return for a complete Israeli withdrawal from territory captured during the 1967 Middle East war.

"It is right for the Saudis to stand up and say in clear terms the time has come to bring peace to the Middle East, to change the relations not only between us and the Palestinians, but the relations between us and the whole of the Middle East. Because it will affect the Middle East, it will enable the Middle East to move ahead from the poverty and backwardness and hatred and blood and tears into a modern society. Because today it is clear in my eyes that it is not poverty that creates terrorism, it is terrorism that creates poverty," Mr. Peres said.

Mr. Peres has said he will remain in the coalition government with Prime Minister Ariel Sharon as long as he believes he has a "fighting chance" to improve the current climate of distrust and despair between Israel and the Palestinians.

The foreign minister has said, however, he will leave the government immediately if his peace proposal is rejected, but would still continue to work outside the coalition for improved relations with the Palestinians.