NEW MIDEAST ACCORD MAY BE NEAR.

Byline: Serge Schmemann The New York Times

Despite all the dramatic gestures, public rancor and political wrangles on both sides, the new Israeli government and the Palestinian Authority are reported to be near an understanding on moving forward with their peace, Israeli officials said Sunday.

The officials and television news programs reported that representatives of Prime Minister Benjamin Netanyahu and Palestinian leader Yasser Arafat had met through the night.

They were said to be trying to conclude a deal that would include a joint announcement of renewed negotiations, a meeting between Netanyahu and Arafat, and a Palestinian agreement to renegotiate some details of the plan for Israeli withdrawal from Hebron.

In addition, there were reports that Israel was considering several ``confidence-building measures'' - including an increase in the number of Palestinian laborers permitted to work in Israel from 37,000 to at least 50,000, the opening of a Palestinian airport in Gaza and possibly the release from detention of Sheik Ahmed Yassin, the ailing spiritual leader of the militant Islamic movement Hamas.

For his part, Arafat made a crucial concession last week when he quietly closed two Palestinian offices in Jerusalem that the Israelis had declared an obstacle to the withdrawal from Hebron, the only West Bank city with a substantial Jewish population.

Initially, Foreign Minister David Levy suggested to reporters while on a visit to Egypt on Sunday that the package could be announced Sunday. But officials close to the talks declined to set a deadline, saying an agreement had not been concluded yet and could still come up against obstacles or disruptions from either the Palestinian or the Israeli side.

The announcement of resumed peace talks would represent a milestone both for Netanyahu and Arafat. No Likud government has ever formally met with Palestinian leaders, and criticism of the previous Labor government's peace with the Palestine Liberation Organization - and specifically its dealings with Arafat - were central themes in Netanyahu's election campaign.

Since taking office, Netanyahu has faced rising pressure from the United States, Arab leaders, Palestinians and many Israelis to resume the peace talks. Palestinians say Arafat also has had to realize that he has no option but to deal with the Likud government, since any retreat from the peace, or any eruption of violence among Palestinians, would be turned as much against him as against the Israelis.

``We've both recognized that we're stuck with each other,'' said an Israeli official close to the talks. ``We're stuck in a boat together, and if either one rocks it, we sink together.''

Even while Arafat has thundered over the last week about an Israeli declaration of war and has called on Palestinians to hold protest prayers in mosques and churches, he and his lieutenants have continued holding private meetings with Netanyahu's representatives and with foreign intermediaries.

In recent days, Israeli officials approved new construction in Jewish settlements and the demolition of a Palestinian social center in Jerusalem and took other well-publicized actions that the Palestinians denounced.

But Netanyahu also defied inevitable outcries from Ariel Sharon and other hard-line members of his government last week by appointing a negotiating oversight committee that included only officials who had demonstrated a moderate stance toward the peace - among them himself, Levy and Defense Minister Yitzhak Mordechai.

Officials said the negotiations on ways to restart the talks had been taking place over the last month in informal meetings between Netanyahu's foreign affairs adviser, Dore Gold, and Arafat's deputy, Mahmoud Abbas, also known as Abu Mazen.

CAPTION(S):

2 Photos

Photo: (1) Benjamin Netanyahu

(2) Yasser Arafat