A deal announced for a new Palestinian government that kept security powers under President Yasser Arafat's control was a "non-starter" towards reviving peacemaking, an Israeli government source said.
"This government...insures that the terror cartel of Arafat will continue to rule Palestinian life. That is a non-starter if you want to move on the road map," a senior source in Israeli Prime Minister Ariel Sharon's office said.
Palestinian Prime Minister Ahmed Korei said today he had sealed a deal with Mr Arafat on a new government and would seek parliamentary approval on Wednesday.
But Mr Korei appeared to lose out in a bid to wrest from Mr Arafat security powers.
Mr Korei told reporters that his candidate for interior minister, Mr Nasser Yousef, would not hold a cabinet post. Instead, Arafat loyalist Mr Hakam Balawi would become interior minister in charge of police, civil defence and preventive security.
The five other Palestinian security services would be overseen by a national council chaired by Mr Arafat.
The deal ended a month-long impasse over composition of a new government but did not meet Israeli and US demands to sideline Mr Arafat.
Mr Korei and Mr Sharon have expressed willingness to discuss reviving the peace "road map" towards a Palestinian state once the Palestinian legislature meets in a few days to approve the cabinet.