GAZA/OCCUPIED JERUSALEM, 24 December — Palestinians yesterday rejected an interim peace proposal by Israeli Foreign Minister Shimon Peres as Chairman Yasser Arafat remained locked in a Christmas standoff with the Jewish state.

Peres has drafted an interim peace plan for a Palestinian state and presented the proposal to Palestinian leaders, Israel’s biggest newspaper reported. Prime Minister Ariel Sharon’s office dismissed the reported plan as fiction. A statement issued by Palestinian Information Minister Yasser Abed Rabbo said the reported proposals fell far short of the state Palestinians envisioned.

The Yediot Ahronot daily said Peres has proposed that a Palestinian state be established on 42 percent of the West Bank and most of the Gaza Strip no later than two months after the interim deal is signed, followed by talks on a final accord.

Abed Rabbo, referring to the patchwork of territory now under the control of the Palestinian Authority, said in the statement the reported plan would only "transform the names of the cantons and isolated areas from an Authority to a state".

Palestinians would "remain under a de facto occupation, but under an illusive cover called a ‘state’", the statement added. Palestinians have demanded a state in all of the West Bank, including Arab East Jerusalem, and the Gaza Strip.

Meanwhile, Arafat vowed to attend Christmas celebrations in Bethlehem despite Israel’s decision to block his visit to the town.

Israel said it decided to bar Arafat’s journey to Bethlehem, through roads sealed off in places by Israeli tanks and troops in the West Bank, because he was not acting "to dismantle Palestinian terror organizations".

Arafat told reporters that "no one can prevent me from going" to Palestinian-ruled Bethlehem. He said Saturday that he would visit the town "even if I have to go there on foot".

It would be an impractical step for the 72-year-old leader, who would have to hike more than 20 km (12 miles) through hilly West Bank terrain to reach Bethlehem from his Ramallah headquarters to the north.

A senior Jordanian official said Amman is prepared to send a helicopter to fly the Palestinian leader to Bethlehem today.

Belgium, which holds the European Union presidency, called on Israel not to prevent Arafat from visiting Bethlehem, but apparently failed to move the government in Tel Aviv.