JERUSALEM (AP) _ Palestinian leader Yasser Arafat and Israeli Foreign Minister Shimon Peres were headed for an economic conference in Spain, where the two leaders were expected to meet for the first since they agreed to call a cease-fire on Sept. 26.
The truce to end more than a year of violence never fully took hold, and differences remain, even over the specifics of the meeting in Spain. Arafat arrived for the conference Friday.
Palestinian Cabinet minister Nabil Shaath said Peres and Arafat would discuss a cease-fire and ``ways to calm the situation and resume the negotiations.''
Israeli Prime Minister Ariel Sharon declared that Peres and Arafat would not conduct negotiations, saying they might meet in a corridor and shake hands.
He rejected calls from party activists to ban Peres from attending the conference.
``Israel cannot allow itself to be absent from international events,'' Sharon replied angrily. ``We are not conducting political negotiations.''
Before leaving for Spain, Peres said he would not negotiate with Arafat. Gideon Meir, a senior Israeli Foreign Ministry official, said, ``First, Peres and Arafat must talk about how they're going to bring an end to this violence.''
However, in an interview published Friday, Peres took issue with Sharon's basic tenet that there can be no negotiations as long as violence continues. ``I would conduct negotiations under fire, because it is impossible to stop fire with fire,'' Peres told the Israeli daily Maariv.
Peres also said he would dismantle some Jewish settlements now. ``I am not doing any favors to the Palestinians,'' he said. ``There are some settlements that draw fire and have no future.'' He said the location of some settlements makes it difficult for Israel to draw a map that would offer both peace and security.
Sharon has said he would offer the Palestinians a state when negotiations resume, but has not said he would dismantle any of the nearly 150 Jewish settlements in the West Bank and Gaza Strip.
After separate talks with Sharon and Arafat Thursday, British Prime Minister Tony Blair said in a television interview on a flight to Genoa, Italy, that he had modest hopes of restarting genuine negotiations in the Middle East.
``I think this is the possibility,'' he said. ``I wouldn't put it any higher than that _ that we can prepare the ground to move the Middle East peace process forward.''
After his talks with Blair, Sharon announced that he and Peres would head the Israeli team when negotiations resume with the Palestinians.
However, Shaath charged that Sharon is trying to sabotage peace efforts. ``He is implementing policies of assassinations, killing and aggression on the ground,'' Shaath said.
Arafat said he is committed to negotiations ``to achieve a just and lasting peace for all the people of the region.''
In the West Bank city of Nablus, about 3,000 people marched in a funeral procession Friday for two activists from the militant Hamas, killed Thursday when Israeli helicopters fired rockets at their car.
Standing on a car, Fayek Abu Eisha, the young son of one of the dead Hamas activists, shouted into a microphone, ``I will avenge the blood of my father.'' Israel said the two were planning a suicide bomb attack inside Israel.
Meanwhile, Israel continued to hold parts of four West Bank towns taken after Palestinian militants assassinated ultranationalist Cabinet minister Rehavam Zeevi on Oct. 17. Defense Ministry spokesman Yarden Vatikay said, ``We are waiting for the Palestinians to take responsibility for the security in those areas.''