Jerusalem, Wednesday

Israeli Prime Minister Benjamin Netanyahu has proposed to Palestinian President Yasser Arafat that Israel and the PLO press to conclude ''final status'' peace talks within six months.

It was not immediately clear if Arafat would accept Netanyahu's proposal to try and finish the talks on the West Bank and Gaza two years earlier than planned.

Political sources confirmed an Israel Channel One report that said Netanyahu had proposed the sides bypass implementation of a 1995 interim peace deal, including three planned Israeli troop withdrawals from the West Bank, to arrive at a final peace deal this year.

Netanyahu's office declined comment on the report.

The proposal comes during a crisis in Israeli-PLO peace talks over Netanyahu's decision to start construction of a Jewish settlement in Arab East Jerusalem and over a planned West Bank troop withdrawal that fell short of Arafat's expectations.

Israel broke ground on Tuesday for 6500 homes for Jews on Jabal Abu Ghneim, a hill occupied in 1967, prompting international condemnation and fears of violence.

Israel's decision to build the settlement on land between Jerusalem and Bethlehem was a blow to the Palestinians, who regard Arab East Jerusalem as the capital of a future state and say the construction precludes planned talks on the city's status.

Netanyahu also raised Palestinian ire over a proposal earlier in the month to withdraw from 9% of West Bank rural areas.

Today, Israel's police chief said the settlement had harmed security cooperation with the PLO and raised the likelihood of guerrilla attacks.

''The new situation between the (Palestinian) Authority and Israel is worse than when we had cooperation and dialogue which...guaranteed there would be no guerrilla attacks,'' police chief Assaf Hefetz said.

In Damascus, three radical Palestinian groups called on Palestinians to launch Jihad (Holy War) and military attacks against Israel to force it to stop building the settlement.

The call was made in separate statements issued in Damascus by the Islamic Jihad group, the Popular Front for the Liberation of Palestine (PFLP) and the Democratic Front for the Liberation of Palestine (DFLP). -Reuter