Israel has taken a tough stance on a PLO demand for early talks on the status of Jerusalem, saying such talks will only begin in 1996. The issue of Jerusalem was brought to centre stage in late July by the Jordan-Israel deal which recognises Jordan's special role in the city's Muslim shrines (see Jordan).

Chief Palestinian negotiator Nabil Shaath said on 2 August that PLO Chairman Yasser Arafat was 'entirely correct' in asking the previous day for the immediate start of negotiations on Jerusalem. 'Jerusalem is the heart of our negotiations on the permanent settlement and we will not accept any pre-empting of that right between now and then,' Shaath said after the first round of PLO-Israel talks in Cairo on expanding limited autonomy to parts of the West Bank. He said the September declaration of principles signed in Washington stipulated that talks should start 'as soon as possible and not later than the beginning of the third year'.

In Jerusalem, Israeli Prime Minister Yitzhak Rabin said on 2 August that the Washington agreement specified talks within two years of implementation of Palestinian self-rule in Gaza and Jericho 'which means the middle of May 1996'.

Israeli and Palestinian negotiators met in Jerusalem for the first time on 1 August to discuss economic co-operation at the subcommittee level. Palestinian sources hailed the move as an Israeli admission that the status of the holy city was still to be determined. Israeli officials denied there was any significance to the venue, the Notre Dame guest house in the former no-man's land between Arab East and Jewish West Jerusalem.