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The Palestinian premier-designate handed Yasser Arafat the authority to appoint most of his new Cabinet, setting up a new confrontation with Israel which has threatened to "remove" the Palestinian leader.

In New York, the U.N. Security Council considered a resolution banning Israeli actions against Arafat.

Israel's ambassador, Dan Gillerman accused the council of "hypocrisy" for considering the Palestinian resolution while not convening to discuss Palestinian suicide bombings and shootings.

The Palestinian envoy, Nasser al-Kidwa, stalked out of the council chamber when Gillerman began to speak.

In Gaza late Monday, several Israeli tanks and bulldozers moved into the Rafah refugee camp on the Egyptian border and destroyed some abandoned buildings, Palestinians said. Such operations have become routine as Israel tries to stop arms smuggling.

Given the Israeli threats against Arafat, European Union foreign policy chief Javier Solana said "there is no possibility in the current atmosphere" to set up a Palestinian government.

Sixteen of the 24 ministers in Ahmed Qureia's new Cabinet will be appointed by Fatah councils controlled by Arafat, officials said Monday, though Israel has said it will have nothing to do with an Arafat-dominated government.

Israel is boycotting Arafat, charging that he is responsible for three years of violence. Last week, Israel's security Cabinet declared it would "remove" Arafat, but no action was immediately taken.

Instead, various ministers spoke of options. Vice Premier Ehud Olmert said killing Arafat was one of them, but on Monday, Foreign Minister Silvan Shalom backed away from that.

"It is not the official policy of the Israeli government," Shalom told reporters. "We don't speak about any killing. We didn't speak about it before, and we don't speak about it today."

The security Cabinet acted after two Palestinian suicide bombings that killed 15 Israelis last week. However, the United States joined European nations and Arab countries in denouncing Israel's ominous declaration.

Early Tuesday, Arafat's national security adviser, Brig. Gen. Jibril Rajoub, said the Palestinian leader wants to reach a ceasefire with Israel, but Israeli officials said they would reject the deal.

Rajoub said he Palestinians would halt all acts of violence in return for an Israeli agreement to end its military operations, including lifting blockades on Palestinian towns and villages.

"We are ready to sit and we are ready to declare a general ceasefire, but there needs to be something mutual because without mutuality nothing will be achieved," Rajoub told Israel Radio. He did not say how the Palestinian Authority would reach a new ceasefire deal with Hamas and Islamic Jihad.

An Israeli government official, speaking on condition of anonymity, said several truces had not ended the fighting. The official quoted a security Cabinet decision from last Thursday which says Israel will not agree to anymore ceasefires.

Israel Radio quoted unnamed government officials as saying the truce offer was an attempt to "rescue" Arafat from the threat of expulsion.

U.N. Mideast envoy Terje Roed-Larsen told the Security Council that the peace process has broken down and that he fears even worse bloodshed lies ahead.

He accused both Israelis and Palestinians of failing to "seriously and actively" address each other's concerns, and stressed that Arafat is the democratically elected leader who "embodies Palestinian identity and national aspirations."

Israeli leaders accuse Arafat of sabotaging peace efforts and blocking a crackdown on the militants, whose suicide bombings and shootings have killed hundreds of Israelis over the past three years.

The Palestinians say the Israelis have tied their hands by carrying out their own raids against militants, frequently killing them and sometimes civilians as well, angering the Palestinian public.

Outgoing Palestinian Prime Minister Mahmoud Abbas, who was backed by Israel and the United States, resigned Sept. 6 after four months in office marked by frequent disagreement with Arafat over the control of security forces and Cabinet appointments. Qureia has told confidants he has no intention of challenging Arafat, who selected him for the job last week.

Raanan Gissin, a spokesman for Israeli Prime Minister Ariel Sharon, said the Palestinians face a choice between sticking with Arafat or establishing a Palestinian state. "The two won't go together. They won't have a state and Arafat — not when Arafat is in control of the process," Gissin said.

The Arab League on Monday condemned Israel's decision against Arafat and warned Israel against harming him.

The U.S. government has said Arafat should be sidelined but not sent into exile.

At his West Bank compound in Ramallah, Arafat flashed victory signs to about 200 Palestinian demonstrators who gathered to show their support.

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