HIGHLIGHTS: Declaration Would Underpin International Consensus That Palestinian Statehood is No Longer Just a Dream, Says Egypt||Arafat Presents Security Plan As Dahlan Resigns||Occupation Troops Kill Teenager||Sharon Approves Fence Plan|| STORY: Egyptian President Hosni Mubarak, who visits the United States this week amid a flurry of Middle East diplomacy, proposed in an interview published on Tuesday the declaration of a Palestinian state before negotiations on its final borders. (Read Photo caption)

The New York Times, which interviewed Mubarak in Cairo, said the Egyptian leader would press President Bush during his upcoming visit to support such a declaration early next year.

The aim, a senior Egyptian official added, would be to offer Palestinians hope, help reduce the level of violence and underpin the international consensus that a Palestinian state must be part of a Middle East peace settlement.

Mubarak indicated that Egypt, which made peace with Israel in 1979, was growing impatient with Washington's reluctance to propose a solution to the Israeli-Palestinian conflict.

"We are fed up with declaration of principles. ... We're going to discuss how can we manage to make a breakthrough.

ADDITIONAL ACTIONS

White House spokesman Ari Fleischer said that after listening to Mubarak and other Middle East leaders, Bush would "determine if there's any additional actions the United States government needs to or should potentially take."

Asked if the United States had a timetable for progress to a Palestinian state, he said: "It's too soon to say. ... If he (Mubarak) has a timetable he'll discuss it with the president and the president will offer his reflections about it."

SUMMER MEETING

According to Egyptioan officials, a crucial juncture would be the international peace conference or meeting which the United States, Russia and the European Union plan to organize in the summer.

The Bush administration has reluctantly stepped into the traditional role of Middle East mediator but has so far resisted pressure to make its own proposals for a solution.

U.S. officials argue former President Bill Clinton went too far when he made his own peace proposals in 2000, just months before he left office.

The United States has concentrated instead on incremental steps designed to reduce the level of violence, in the hope this will lead to political talks.

Two U.S. envoys -- CIA Director George Tenet and Assistant Secretary of State William Burns -- have been in the Middle East this week working on security and political issues.

The United States says the final settlement should include a Palestinian state alongside Israel but it has not taken a position on the borders or other details.

Mubarak meets U.S. officials in Washington on Thursday and then goes to the presidential retreat at Camp David on Friday and Saturday for talks with Bush.

Sharon will meet Bush in Washington on Monday.

ARAFAT PRESENTS SECURITY REFORM PLAN

Responding to growing U.S. pressure to fight terror, Yasser Arafat presented CIA) Director George Tenet with a plan Tuesday for restructuring the unwieldy Palestinian security apparatus. Israel called the proposals "worthless."

The Palestinian leader appointed a 73-year-old general to head the new security array, but Israel said the proposed changes are largely cosmetic because Arafat remains in charge. Some Palestinians also were skeptical, because the reform would still leave six different security branches.

The plan presented to Tenet calls for cutting the number of Palestinian security services in half. They would include police, border guards, internal security and external security, military intelligence and Arafat's personal guard unit.

Israeli media reported that Tenet told Arafat the reform plan was unacceptable. According to Israel TV's Channel 2, Tenet told Arafat he must appoint an interior minister, a post Arafat has held since the Palestinian Authority was established in 1994.

Palestinian officials said the new security chief is to be Maj. Gen. Ahmed Razak Yehiyeh, who was the commander of the Palestine Liberation Army before Arafat and his leadership returned to Gaza in 1994 and set up the Palestinian Authority.
The PLA operated in Lebanon and other Arab countries as the military wing of Arafat's PLO.

There was no official announcement of the appointment.

DAHLAN RESIGNS

Yehiyeh's appointment was seen as a slap in the face to several current commanders, especially Dahlan, the powerful Gaza chief, who was hoping to take overall command. Some Palestinians said Arafat's appointment of the elderly general was a way of maintaining control himself.

Dahlan announced his resignation from the Gaza security post late Tuesday, but said Arafat offered him alternative positions, which he was considering. A senior Palestinian official said Dahlan was offered the role of national security adviser.

ISRAELI OCCUPATION TROOPS KILL A PALESTINIAN TEENAGER

In the West Bank, Israeli troops raided several Palestinian areas in search of suspected Palestinian militants. In one confrontation, a 16-year-old Palestinian was shot and killed by soldiers dispersing stone throwers, doctors said.

Near Nablus, Israeli soldiers opened fire at an armored vehicle carrying two photographers from the Reuters news agency.

No one was hurt, but the vehicle was slightly damaged. The photographers said the vehicle was clearly marked as a press car. The Israeli military told Reuters it would check the incident, but the vehicle was apparently in a closed military zone.

SHARON APPROVES FENCE

Sharon reluctantly approved building a fence between part of the West Bank and Israel's narrowest sections, blocking the way from Palestinian towns on the unmarked line and Israeli cities a few miles away.

The cities, including Netanya and Hadera, have been frequent targets of Palestinian bombers, and residents have been pressuring their government to block access.

The fence is to run 68 miles from a point northeast of Tel Aviv to southeast of Haifa, a stretch of country parallel to the Mediterranean Sea. At some points, Israel's narrow coastal strip is only nine miles wide.

PHOTO CAPTION

Egyptian President Hosni Mubarak, who visits the United States this week, proposed in an interview published June 4, 2002 the declaration of a Palestinian state before negotiations on the final borders, the New York Times reported. Mubarak (L) is seen with Sen. Joe Biden (D-DE) during a meeting with the Senate Foreign Relations Committee at the Capitol on March 6. (Win McNamee/Reuters)