HIGHLIGTSArafat Welcomes U.S.-Backed Call for Cease-fire & Demands UN Troops be Sent to Territories || Qadumi Asks for January Arab League Summit|| Fayyad Promises to Stamp out Financial Corruption|| Israel Bans Another Israeli Arab from Running for Elections||STORYYasser Arafat said he welcomes a U.S.-backed call for an immediate cease-fire with Israel, but stopped short of committing to steps the Palestinians would be required to take ahead of such a truce.

In a speech marking the anniversary of the 1965 founding of his Fatah group, Arafat also suggested that growing tensions over Iraq could make the Palestinians more vulnerable to Israeli military offensives.

In Gaza City, tens of thousands of Palestinians gathered in the main square to mark the anniversary, with participants chanting "Arafat, Arafat" as his speech was played over loudspeakers. It was one of the largest gatherings since Arafat returned from exile in 1994 as part of interim peace agreements.

Israel and the United States have been demanding Palestinians change their leadership which they accuse of not doing enough to stamp out resistance to occupation which they call terror.

However, U.N. Secretary-General Kofi Annan said Tuesday that Arafat must not be sidelined. Annan was speaking on Israel occupation Army Radio in a telephone interview from his New York office.

The United Nations - along with the United States, the European Union and Russia - has been formulating a "road map" to Mideast peace.

Arafat said Tuesday he welcomes "the call by the Quartet for an immediate cease-fire between the two sides and in all areas."

SEND UN TROOPS TO PALESTINIAN TERRITORIES, SAYS ARAFAT

Arafat also asked for UN peacekeepers to be sent to the territories controlled by the Palestinian authority and said he feared Israel would exploit any war with Iraq to crack down harder on those people he claims to represent.

Arafat was speaking to the Belgian daily Le Soir in an interview.

Arafat told the paper he was also confident that talks between his movement and the Islamic resistance movement Hamas would lead to an end to what is called suicide attacks in Israel and allow peace talks with Israel to resume.

Hamas is expected to resume talks with Palestinian Arafat's Fatah movement in Cairo next week to discuss a possible halt to attacks against Israeli civilians.

PALESTINIANS ASK FOR JANUARY ARAB LEAGUE SUMMIT

In Damascus, Faruq Qaddumi, head of the PLO'S political bureau said on Tuesday, the Palestinians have asked for an early Arab League summit to be held in January to discuss the situation in the occupied territories.

A meeting of the Cairo-based pan-Arab body is already scheduled for March 2003.

Qaddumi was speaking after talks in the Syrian capital on the 27-month Palestinian intifada, or uprising against Israeli occupation, with Syrian Foreign Minister Faruq al-Shara.

He hailed the talks between Palestinian factions currently underway in Cairo that are being brokered by Egyptian officials.

FAYYAD PLEDGES TO STAMP OUT CORRUPTION

Yasser Arafat's government presented a proposed 2003 budget Tuesday, pledging to stamp out corruption and improve record keeping as urged by the United States and other foreign donors.

The DLRS.3 billion budget forecasts a deficit of DLRS. 747 million, but Palestinian Finance Minister Salam Fayyad told parliament he expected foreign donations and revenue from unspecified overseas investments to cover the shortfall.

It was Fayyad's first budget since he took office in June in a Cabinet reshuffle forced on Arafat after complaints about his inefficient and corrupt administration.

ISRAEL VOTES TO BAN ARAB PARTY

In other news, Israeli Prime Minister Ariel Sharon on Tuesday fired a deputy minister to contain damage from a party corruption scandal ahead of Jan. 28 elections, and the Election Commission disqualified a second Israeli Arab candidate.

Sharon fired Naomi Blumenthal, deputy minister of infrastructure and a longtime member of parliament from Sharon's Likud Party, for refusing to answer police questions about alleged misdeeds in the selection of Likud candidates for parliament, said Sharon campaign spokesman Lior Chorev.

Sharon's party is heavily favored to win the election, giving Sharon another term as prime minister, but polls show that the election corruption allegations could cost the party several seats in parliament.

Meanwhile, Israel's Election Commission disqualified a leading Israeli Arab lawmaker from running in Jan. 28 elections, the second such move in two days, leading experts to warn of a widening rift between Jewish and Arab Israelis and a threat to Israeli democracy.

The commission, made up of representatives of political parties, voted 22-19 early Wednesday to disqualify Azmi Bishara and banned his Balad party by a vote of 21-20, said commission spokesman Giora Pordes.

On Monday, the panel, voting along political party lines, banned another Arab legislator, Ahmed Tibi, from running again.

PHOTO CAPTION

Fatah members dance with their rifles while other activists wave Palestinian and Fatah flags during a rally to mark the 38th anniversary of the movement's foundation in Gaza City, Tuesday Dec. 31, 2002. Tens of thousands of Palestinians gathered in the main square to mark the anniversary of the 1965 founding of Fatah. (AP Photo/Adel