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CLOSURES COULD TOPPLE ARAFAT, ISRAELIS TOLD

Yasser Arafat's self-rule government could fall if Israel continues to bar most Palestinians from their jobs in the Jewish state, the army chief of staff has warned.

Lt. Gen. Amnon Shahak told lawmakers Tuesday that sealing off the Gaza Strip and West Bank has "greatly" reduced guerrilla attacks inside Israel, but cautioned that the tactic could boomerang by deepening the Palestinians' poverty."The closure is creating hatred among hundreds of people in the Gaza Strip," Shahak told a closed session of the Knesset Foreign Affairs and Defense Committee, according to an official briefing by a spokesman Wednesday.

"They have anger against the Palestinian Authority, but it is obvious that the attacks will be turned on us," Shahak said.

Shahak also said Islamic Jihad, which has carried out a series of suicide bombings against Israelis, has threatened to attack the heads of the Palestinian Authority.

Wednesday, the Cabinet discussed the possibility of lending the Palestinian Authority money to bolster Arafat.

Police Minister Moshe Shahal said he proposed Israel help to replace the $300 million Palestinian laborers lose annually by the closure of Gaza and the West Bank.

"Every shekel we invest pays for itself in security," Shahal told reporters Wednesday following the weekly meeting of the 18-member Cabinet.

Economics Minister Shimon Shitreet said Israel could speed up delivery of the $100 million in aid Israel pledged over a five-year period and to turn over hundreds of millions of shekels in taxes Israel has collected from Palestinians.

While no decisions were made, Prime Minister Yitzhak Rabin reportedly backed the proposals.

More than 120,000 West Bank and Gaza residents worked in Israel before the Israel-PLO accord, but Wednesday only 14,000 Gazans and 15,000 West Bank residents have permits to cross.

Unemployment in impoverished Gaza is about 50 percent. Palestinians say the closure is costing $3 million a day in lost revenues, offsetting any benefit from foreign aid.

Arafat's spokesman, Nabil Abu Iredeineh, dismissed Shahak's warning, saying the closure was threatening the peace process and not Arafat.

"Such measures will lead to the destruction of the whole peace process and not the Palestinian Authority," he said.

"The Israeli closure will not achieve security for Israel," he said. "The only way to do that is to speed up the implementation" of the peace agreement to extend Palestinian rule to the West Bank.