Israel's Prime Minister-elect, Mr Ariel Sharon, and the outgoing leader, Mr Ehud Barak, have agreed on most of the guidelines for a national unity government, an official of Sharon's Likud party said last night.
"The two sides reached an agreement on most clauses," the official said, without revealing further details. He said the sides would continue talks today to negotiate cabinet portfolios.
Meanwhile, the violence continued, with two more deaths in the West Bank. The death toll in the region since the end of last September is now estimated at 400.
The agreement appeared to boost chances that Mr Barak's centre-left Labour party would join with the right-wing Likud to establish a government that would be receptive to peacemaking with the Palestinians.
Israel Radio reported Mr Barak and Mr Sharon had approved a joint platform stating the government would be committed to reaching an interim peace deal with the Palestinians.
The first person killed yesterday was Atef Ahmed al-Nabulsi (25), who was shot dead in his taxi by Israeli troops near the village of Rafat, outside Ramallah, at about 7 a.m. The Israeli army said he had tried to run down soldiers at a checkpoint, but local people said it was an ambush. His 17-year-old cousin, who was a passenger in the car, was also shot but was expected to recover.
Israeli troops also shot dead Mr Zyad Abu Sway (20) as he was attempting to enter Jerusalem from the village of alKhader near Bethlehem.
Witnesses and medical officials said he was travelling in a minibus with other Palestinian labourers. At least 50 Palestinians were reported injured at the Khan Yunis refugee camp in the Gaza Strip when Israeli forces responded to Palestinian sniper fire.
The latest Israeli victim of the violence, Tsahi Sasson (35), was buried yesterday. He was shot dead by a Palestinian sniper on Sunday.
The President of the Palestinian Authority, Mr Yasser Arafat, yesterday held talks in Cairo with the Spanish Prime Minister, Mr Jose Maria Aznar.
Mr Arafat said they had discussed the possibility of convening a special peace conference in Madrid to mark the 10th anniversary of the previous such event in the Spanish capital.
The European Union had an important role to "revive the peace process and protect us", Mr Arafat added.
Additional reporting: Reuters