HIGHLIGHTS: Israel defence minister praises Palestinian security team as "sincere"||Palestinians to discuss government reforms with donors, diplomats||Mayor opposes "collective punishment" in east Jerusalem|| STORY: Some 3,000 people attended the funeral of Popular Front for the Liberation of Palestine (PFLP) chief Ahmad Saadat's brother, slain by the Israeli army, an AFP reporter said.

Mohammad Saadat, 22, was shot seven times Tuesday night as he resisted an Israeli special unit trying to capture him outside his Ramallah home. The gunfight also left two of Israeli soldiers wounded, the army said.

Some people in the funeral procession called on the Palestinian Authority to immediately stop security discussions with Israel.

Sakher Habash, a local leader of Yasser Arafat's Fatah faction, slammed the Israeli-Palestinian understanding on a phased Israeli withdrawal from recently reoccupied areas in exchange for a Palestinian crackdown on Resistance activists

Israel defence minister praises Palestinian security team as "sincere"

Israeli Defence Minister Binyamin Ben Eliezer meanwhile praised Palestinian security officials as "sincere and serious" in their desire to implement a plan to enforce a truce in return for an Israeli pullback from reoccupied areas.

The Labour party leader was talking as a rare calm prevailed followed the latest round of security talks and the arrest of a Palestinian Resistance cell operating inside Israel, using occupied east Jerusalem as a base.

Palestinian security officials met late Wednesday with their Israeli counterparts at the Erez checkpoint in the northern Gaza Strip despite a deadly Israeli raid into a Gaza town that prompted Palestinian accusations of "doubletalk".

Isralei forces quit Bethlehem, just south of Jerusalem, on Monday night.

An Israeli army statement said the meeting "took place in a positive atmosphere, and its objective was to verify how to put in place the arrangements made by the defence minister."

It said the Palestinians had agreed to "immediately act to restore calm to the land and prevent violence," while the army would "continue to apply measures to improve the lives of the Palestinian population in humanitarian terms."

Both sides have kept the details of the plan -- which Israel stresses is no more than an "undertsanding" -- under wraps, after dozens of previous such projects have collapsed in vicious outbursts of fighting.

The two sides are to meet again later in the week to mull further confidence-building measures in the Gaza Strip and Hebron in the southern West Bank.

The talks have been matched by intermittent discussions among the various Palestinian factions, who were expected to meet again this week to try to work out the future of their 23-month struggle, or intifada, against Israeli occupation.

Yasser Arafat's Fatah movement has called for Resistance groups to focus their attacks exclusively on the occupied territories.

Palestinians to discuss government reforms with donors, diplomats

Meanwhile, a team of Palestinian ministers was discussing sensitive proposals for administrative reform of the Palestinian Authority with an international working group comprising both countries concerned by the Middle East crisis and donor states.

The talks, which are taking place behind closed doors in Paris, were also to focus on how the reform process -- due to be completed well before the Palestinian Authority (PA) holds planned elections early next year -- can be financed.

The Palestinian delegation, headed by the PA's information minister Yasser Abed Rabbo, was meeting with officials from the diplomatic "quartet" comprising the European Union, Russia, the United Nations and the United States, and also diplomats from Israel, Japan, Norway, the International Monetary Fund (IMF) and the World Bank.

While the international delegations were headed only by civil servants -- that of the United States being led by Liz Cheney, an assistant to the US deputy secretary of state for Middle Eastern affairs who is also the daughter of US Vice President Dick Cheney -- the Palestinians had sent no less than five ministers to the two days of talks.

In addition to Rabbo, their delegation comprised the ministers of finance -- former IMF official Salam Fayad -- and of the economy, labour and tourism.

Mayor opposes "collective punishment" in east Jerusalem

At the same time, Jerusalem Mayor Ehud Olmert said he opposed a "collective punishment" on the Palestinians in east Jerusalem, after Israeli police cracked a major Hamas cell there.

Olmert's comments Thursday came as Interior Minister Eli Yishai said he would hasten to withdraw the residency permits of four of the men who live in east Jerusalem, a fact that enabled them to move freely inside the Jewish state.

"The presence of a handful of terrorists among the 210,000 Palestinians who are Jerusalem residents does not justify collective punishment," said Olmert, a member of Prime Minister Ariel Sharon's Likud party.

Israel's security services announced on Wednesday they had broken a ring of the Resistance group Hamas.

Four of the 15 Palestinians arrested were residents of east Jerusalem, which Israel occupied and annexed in during the Six Day War in 1967. Most of the residents refused Israeli citizenship, but were given Israeli residency permits.

PHOTO CAPTION

An Israeli soldier guards detained Palestinians in an Arab suburb of East Jerusalem, August 22, 2002. Israel announced that it was considering stripping the residency status of four Palestinians arrested by its security forces on suspicion they carried out a bombing at Jerusalem's Hebrew University and other attacks which killed 35 people. (Ammar Awad/Reuters)