37 Palestinians and 11 Israelis have died in a second day of fighting, which began during a protest over a tunnel near a Muslim Holy site in Jerusalem. A background report from Independent Television News is followed by a discussion with Palestinian and Israeli officials, and Jim Lehrer.

JIM LEHRER: Now the official views of Israeli and the PLO. Colette Avital is the Israeli Consul General in New York. Hasan Abdel Rahman is the PLO representative in Washington. Mr. Rahman, is this the beginning of a full-scale military uprising by the Palestinians?

HASAN ABDEL RAHMAN, PLO Representative: Well, let's hope not. Let's hope that some sense will be injected into the head of Mr. Netanyahu, and that he will take the right action, namely to close down this tunnel which triggered those latest incidents, and implement the agreements that we had signed with the Israeli government and come back to the negotiating table. That's what we want to happen.

JIM LEHRER: Let's take these things one at a time. Explain to us why opening the tunnel was such a flash point.

MR. RAHMAN: It is, uh, because it comes at the culmination of a series of policies and actions by the Israeli government which want to determine the future of Jerusalem away from the negotiating table. We have agreed with the previous Israeli government that Jerusalem is going to be negotiated, and those actions by the Israeli government, such as building settlements, demolishing Palestinian homes, uh, taking away Palestinian rights of residence from citizens of Jerusalem, those are actions that are contrary to the letter and the spirit of the peace process and the agreements that we signed with Israel.

Jerusalem is a city that was occupied in 1967. No country in the world, including the United States, recognizes the annexation of Jerusalem. We have agreed with Israel that it is going to be negotiated, and adding to that that this tunnel--

JIM LEHRER: Explain the tunnel--for those who have not been to Jerusalem, explain why that's--

MR. RAHMAN: Yeah. It is a tunnel that runs to the western--under the western edge of the holiest shrine of Islam, namely El-hal Misharif. It threatens the very foundation of that, uh, sanctuary, and the Palestinians do not want Israel to open that tunnel, uh, so that we felt that this was a challenge to the Palestinians. Of course, this happened in the context of a feeling among the Palestinians that this Israeli government is not serious about peace.

JIM LEHRER: Ms. Avital, is that the way to read the opening of the tunnel, that this Israeli government is not interested in peace?

COLETTE AVITAL, Consul General, Israel: (New York) Let me first say that those are images that I had hoped, and most Israelis had hoped, we'd never see again. And that was the purpose exactly of signing an agreement with the Palestinians. And tonight, 11 families are mourning in Israel, and many more are worried about their children. So, no, I don't think that was an act of provocation. I think that if you look at the facts, this tunnel doesn't endanger any Muslim place, certainly not the mosque. It is 400 yards away. The opening is really 400 yards away.

I think that anyone who cares to look at the facts and not at their interpretation knows very well that the Muslims knew what was happening there. Archaeological digs have been pursued for 17 years, and I don't think that this is a good reason or a good excuse to start violence. I believe that whatever frustrations, whatever recriminations, whatever misunderstandings might happen, we have put in place the mechanism, we have put in place committees, steering committees that are serious about negotiating peace, and I believe that this is where the negotiations should happen, not with the scenes of violence that unfortunately endanger the peace process.

JIM LEHRER: What is your reading then of what triggered this violence and what caused it? Who's at fault here?

MS. AVITAL: I think that what we have seen is a mounting, I would agree with Mr. Abdel Hasan, even though I read it differently, there has been a mounting campaign both of intimidation and the verbal expressions that have brought about an atmosphere. This doesn't happen in a vacuum.

We've seen from our part that the government of Israel hadn't even started functioning, the new government, that is, there was a summit in Cairo, and then afterwards, there were attacks on the North and then we heard verbal attacks from Egyptian sources and so on. There is a mounting tension, and I think that one should leave this government the possibility to get into serious negotiations. After all, there were openings, there were statements which were meant to assuage any kind of fear.

The prime minister, the foreign minister, the minister of defense spoke to Mr. Arafat, respectfully. Uh, mechanisms have been put in place to start negotiating permanent status and all the other, um, subjects that are still pending. A lot was done to try to ease some of the tensions that came as a result of the closure. We have to be able to move forward, after all.

We've been going through many negotiations, many hurdles, many, many obstacles in the past, and we knew that when those difficulties occur, this is where we come to the negotiating table, so I think that we all have a way of dealing with the matters. I do not want to point fingers but I believe that if there is a Palestinian police force and it is a strong police force, the Palestinian Authority and Chairman Arafat should be able to master the situation, to control the situation, and to give the right kind of orders for the violence to cease.

JIM LEHRER: Mr. Rahman, why did the Palestinian police fire at the Israeli soldiers?

MR. RAHMAN: First of all, let me go back to something that Ms. Avital said, and that's, yes, there were statements by Israel, by the Israeli government about their commitment to the peace process. But they never went beyond these statements. The policies of the state of Israel on the ground of this government are totally in contradiction with those statements--expanding settlements, uh, cutting off Gaza from the West Bank, policies that are reminiscent of the kinds of occupation.

We are engaged in a peace process with Israel. This peace process requires from Israel a change from this government to pursue the agreements that we have signed with the previous government. They did not. I don't believe that public relations is a substitute for public policy. You asked about why the police force. Who started shooting? It is the Israeli army who attacked peaceful Palestinian demonstrators, and the Palestinians have the right to demonstrate against something that they don't like, and they feel it is an encroachment on their rights in Jerusalem. They shot in self-defense, most of the cases.

The Israeli army is in Gaza and the West Bank. The Palestinian police force is not in Tel Aviv and in Haifa and the other. So who is at fault here? It is the Israeli military establishment that wants to force on the Palestinians a situation that Palestinians do not and will not accept.

JIM LEHRER: Ms. Avital, is that your understanding, that--

MS. AVITAL: No.

JIM LEHRER: --the Palestinian police force was firing in self-defense after the Israeli soldiers fired on the demonstrators?

MS. AVITAL: This is not my understanding, nor is it really the letter of the spirit of the agreement. There were demonstrators, and I think that it is really the task of the Palestinian to calm down the demonstrations. And when that did occur, obviously our forces had to get into action but those are very violent demonstrations, they degenerated, it is true, but if you take just one instance--and let me give you one example--that of the Tomb of Joseph--there are people who are inside who are closed inside.

This is a holy site. There are 40 people there. Both the mob--the Palestinian population and Palestinian armed forces, police attacked this place and are keeping this--the people there as hostages inside. Now there is no act of provocation there, nobody from inside attacked anyone.

MR. RAHMAN: But you cannot separate what's happening in Nablus--

MS. AVITAL: I think that we are--

JIM LEHRER: Let her finish.

MS. AVITAL: We cannot separate things, and I think that you have to understand that much as we have the task of restraining our people and keeping order in our midst, the Palestinian police has a certain task to perform. It may not be easy, but I think that this is something that we must control together. I believe that in a conversation, uh, that Chairman Arafat had with the prime minister, he said that he controls only 80 percent of the Palestinian police. I think that this is a situation that has to be taken care of and has to be under the control of the Palestinian Authority.

JIM LEHRER: Let's start where we go from here. Now, for instance, Prime Minister Netanyahu has called for a meeting with, with Chairman Arafat.

MR. RAHMAN: Yes.

JIM LEHRER: Is that going to happen?

MR. RAHMAN: I hope it will happen, and I guess preparations are underway for it to happen, but you know meetings are not in themselves an objective. Unless there are complete results of those meetings, they are useless. There have been meetings with the prime minister, with the minister of defense, with the minister of foreign affairs, and they did not lead anywhere. Israel must close down this tunnel. It's a provocation. The Palestinians--

JIM LEHRER: If Israel--is your understanding, and do you believe that if Israel closed the tunnel, the peace would return?

MR. RAHMAN: No. This definitely calmed the situation. Then we will move to implement the other agreements, such as withdrawal from Hebron, and opening the, uh, the safe passage, the agreements that the government of Mrs. Avital agreed to.

JIM LEHRER: Let's take this one step at a time. Ms. Avital, do you think that Prime Minister Netanyahu is going to close that tunnel?

MS. AVITAL: I don't believe so, but I believe very frankly that there's no alternative to the peace negotiations. We must try to get these negotiations between them going, not through me and Mr. Abdel Rahman--

JIM LEHRER: Sure.

MS. AVITAL: --or on television. I think that both parties will find the right way to solve, to solve the situation, and to de-fuse the bomb.

JIM LEHRER: You don't think it's going to get worse.

MS. AVITAL: I hope it won't get worse. I think that we're speaking of a country where public opinion is very important. The perception of the Israelis of seeing people that we have armed to whom we have given armament, uh, turning the arms against us is something which is very difficult and, therefore, I believe we have to see first and foremost that the violence ceases, and second of all, I believe that we must negotiate but no Israeli government in the past and no Israeli government in the present can accept ultimatums or can negotiate under pressure or under violence. So I think that this is something that everybody knows, and this is something that has to be taken into account.

JIM LEHRER: So what happens, Mr. Rahman?

MR. RAHMAN: I think there is a misreading here of the Palestinians. I believe what Mrs. Avital is saying is absolutely dangerous. She thinks that the Palestinian police will be some sort of agents of Israel in the Palestinian territories and not a security police for the Palestinians and not acting as agents of Israel. This is absolutely the wrong impression. We thought that this process will culminate in the establishment of an independent Palestinian state, that lives next to Israel. This process will occur incrementally and gradually.

I personally believe that unless there's a change on the ground where the Palestinians feel that this peace is worthwhile for them, a return without even a decision does not need a decision from Yasser Arafat, but the people are--the Palestinian people will fight for their rights.

JIM LEHRER: And so you--I've--if I hear the two of you correctly, I don't hear a lot of optimism. Do you hear a lot of optimism here, Ms. Avital?

MS. AVITAL: I would prefer to see what has been achieved. I believe that a lot has occurred on the ground. I believe that somehow Palestinians started seeing hope, and I believe that in a way their situation has improved for the first time. They're running their affairs and they have their own government, and I believe that this government, like the previous government, doesn't want to interfere or to run Palestinian lives. In the agreement that we have signed with the Palestinians, there was no commitment from anyone--

JIM LEHRER: Well--

MS. AVITAL: --to have a Palestinian state. The permanent status agreement was left open-ended for negotiations, and this is the purpose of sitting down and negotiating. So I think that we have to re-establish peace but not only to re-establish peace but to re-establish good lines of communications and trust. After all, we are partners.

JIM LEHRER: Are the lines of comm--

MS. AVITAL: We have no one else as partners, and I believe that we are capable and can live side by side, respecting each other, and trying to iron out these differences, deep as they may be. We have different aspirations. We never agreed that our aspirations are going to be totally fulfilled. We have to come towards meeting each other's needs. Certainly Israel has needs of security and--

JIM LEHRER: Sure. Let me get--we're almost out--let me give a final word here to Mr. Rahman, just--

MR. RAHMAN: Yes.

JIM LEHRER: --on the--what happens tomorrow.

MR. RAHMAN: We have heard enough talk about peace and about the improvement of the quality of life for the Palestinians, but we have not seen it on the ground. What we have seen is totally different actions by the Israeli government. We hope that, as I said, that this will be an eye opener for Mr. Netanyahu, that he will come back to the negotiating table, and realize that the times of occupation are over, and now we need to move in the context of reciprocity and the mutual respect--

JIM LEHRER: All right.

MR. RAHMAN: --and realize that the Palestinian people have the right to live in freedom and dignity as a free people.

JIM LEHRER: All right. We have to leave it there. Thank you both very much.