JERUSALEM - Palestinian leader Mahmoud Abbas, the leading contender to succeed Yasser Arafat, said Friday that Israeli Prime Minister Ariel Sharon's hope of annexing West Bank settlements and keeping all of Jerusalem in a final peace deal is a disaster that could torpedo efforts to restart peace talks.
Abbas' comments came as Israeli troops raided the Khan Younis refugee camp in retaliation for recent Palestinian mortar attacks, killing eight Palestinians, including at least five gunmen, in the deadliest day of fighting since Arafat's death last month.
The violence and the disagreement over a peace plan were reminders of the obstacles ahead despite the rare feeling of optimism that has swept the region since Arafat's death, with both Israelis and Palestinians calling for new negotiations to end their conflict.
Israeli officials have promised to help ensure that Palestinian elections go smoothly, and Palestinian leaders have been working to persuade militants to halt attacks on Israel.
Israeli officials had also expressed support for a possible Middle East conference in Britain next year. But an Israeli official said Friday that Israel did not plan to attend because the meeting would deal with Palestinian issues, including internal reform and donor funding.
In a major policy speech Thursday, Sharon said his plan to withdraw from Gaza next year, coupled with Arafat's Nov. 11 death, could turn 2005 into a "year of great opportunity." He held out the prospect of an independent state for the Palestinians if they stop attacks.
But Sharon also reiterated his determination to hold onto some large West Bank settlements and all of Jerusalem in a final peace deal. The Palestinians want all the West Bank, Gaza and East Jerusalem for a future state.
In a telephone interview from the Persian Gulf state of Qatar, Abbas called Sharon's comments a "disaster."
"If (Sharon) puts these conditions on the table and says that he wants to negotiate on this basis, then I think he's closing all the doors to peace," Abbas said.
He said Israel must honor the internationally backed "road map" peace plan, which called for the creation of a Palestinian state next year. The plan stalled soon after it was signed in 2003 with neither side meeting its initial commitments.
"If the Israelis are ready to sit with us to negotiate implementing the road map, without any conditions, then we are ready to sit with them, because what we want is to implement the road map," Abbas said. "We will implement our part, and they should implement their part."
Abbas also called on President Bush to pull back from his statement in April endorsing Israel's plan to hold onto parts of the West Bank in a final peace settlement and ruling out Palestinian refugees returning to Israel.
In recent days, Abbas has criticized the 4-year-old armed uprising against Israel, but he has not pulled back from the key Palestinian demand for a full Israeli withdrawal from lands it captured in the 1967 Mideast war.
Regardless, Abbas, is seen as the candidate favored by Israel and the United States in the Jan. 9 elections to succeed Arafat.
An American monitoring team, including former President Jimmy Carter, will travel to the region to observe the vote. The U.S. team will join a European Union observer mission.
In an effort to promote calm before the election, Israel has said it would not carry out raids against Palestinians unless it is attacked or about to be attacked.
On Friday, the army moved into the Khan Younis refugee camp in southern Gaza, following a week of mortar barrages and rocket attacks on Israeli targets that killed a Thai worker in a Jewish settlement and injured 17 other people, including 11 soldiers.
"We entered (the camp) to distance the threat and catch those who are shooting," said the deputy commander of Gaza's Southern Brigade, Lt. Col. Dotan Razili.
Bulldozers and tanks knocked down buildings in the camp. Dozens of civilians took refuge in a hospital, camping in the hallways and the lobby as an Israeli tank sat outside. Other families stayed with relatives, or spent the night at a stadium.
On Friday night, an Israeli aircraft attacked a group of militants planting an explosive device, the army said. The attack killed one Hamas militant and wounded three other people, Palestinian officials said.
The fighting throughout the day killed eight Palestinians, including at least five militants, according to medical officials. At least 27 others were wounded, including an ambulance driver and five children under age 16, hospital officials said.
One Israeli soldier was wounded, the army said.
Late Friday, Israeli aircraft attacked two empty buildings in Gaza City that the army said were weapons factories used by Hamas militants. Palestinian hospital officials reported no injuries.
Palestinian officials said seven missiles hit a metal workshop and a car repair garage.
Israeli aircraft also launched an airstrike at a building covering a weapons-smuggling tunnel near the Gaza border with Egypt, the army said.
A separate tunnel collapsed late Thursday, trapping six Palestinians, witnesses and officials said. Military officials said Palestinians told the army five bodies had been removed from the tunnel. Palestinian officials denied the report.
Also Friday, Labor Party leader Shimon Peres agreed to bring his party into Sharon's minority coalition in the coming days, a move that would shore up the government. Final, minor details outlining the coalition agreement will be worked out between negotiators in a meeting Saturday, Peres spokesman Yoram Dori said.
Sharon is expected to bring the coalition agreement for a vote in parliament Monday, Israeli media reported.
