ARAFAT CONDEMNS ISRAEL, CALLS STRIKE.

Byline: Serge Schmemann The New York Times

Yasser Arafat, the Palestinian leader, charged Wednesday that the expansion of Jewish settlements and actions in Jerusalem by the Netanyahu government amounted to a ``declaration of war on the Palestinian people,'' and he called for a general strike this morning.

At Arafat's suggestion, the Palestinian Legislative Council also called on all Palestinians who could to gather at Al Aksa Mosque in Jerusalem for Friday prayers, and for all Palestinians to march after the prayers to protest the new settlement activity.

Though the strike was to last only four hours and would not directly affect Israel, the measure carried considerable symbolic impact as the first public protest against Israel called by Arafat in the two years since he took charge of the autonomous Palestinian areas. For Israelis it carried the clear reminder that general strikes marked the opening of the civil strife that preceded the signing of the Israeli-Palestinian peace.

The call on Palestinians to gather at Al Aksa Mosque, the emotional focus of the Arabs' claim to a share of Jerusalem, carried the additional effect of calling on Palestinians to defy restrictions on their movement out of the West Bank.

Arafat's speech, made to a session of the Palestinian Legislative Council in the West Bank city of Ramallah, was his strongest challenge to the right-wing Israeli government since its election in May. In recent weeks, facing growing criticism among Palestinians over the plight of the peace agreement he signed with the Israelis, Arafat has waged an escalating campaign to mobilize internal and foreign support against the policies of the new Israeli government.

``What is happening are continuous violations and crimes by this new Israeli leadership, which means a declaration of war on the Palestinian people, starting with settlement activity,'' Arafat said.

He said the strike should serve as a warning ``that the situation is dangerous,'' and said its rallying cry would be Jerusalem as the Palestinian capital.

Prime Minister Benjamin Netanyahu's claim that Jerusalem will remain an undivided Jewish capital has been one of the major sources of contention.

Netanyahu responded by saying such ``inflammatory rhetoric'' should be avoided.

``I think it would be a very grave mistake to have an escalation of rhetoric or of deeds, especially an escalation toward violence,'' he told reporters.

``We are in the process of concluding a framework for moving ahead and negotiating many of the outstanding issues between Israel and the Palestinians, something that I would like to do and I hope that this kind of escalation does not hinder it.''

Netanyahu repeatedly has insisted that he is committed to the agreements with the Palestinians and that various initiatives are in the works, but the process has remained stalled, while Jewish settlers have resumed building.

On the day before Arafat's appearance, the Israeli government gave its first formal permission to a Jewish settlement to expand beyond its existing boundaries, and bulldozers were already at work Wednesday around the ultra-orthodox community of Kiryat Sefer in the West Bank.

In another development that infuriated Palestinians, Israeli crews used a crane to hoist a bulldozer over the walls of Jerusalem's Old City at 4 a.m. Tuesday and proceeded to demolish a Palestinian day-care center for the disabled in the Moslem quarter, saying it was being restored without a building permit. The Canadian government recently had donated $30 million to the center.