PLO Chairman Yasser Arafat and Israeli Foreign Affairs Minister Shimon Peres were to hold their second meeting in just over a week on 7 February in Cairo in an attempt to close the remaining gaps between the two sides. Arafat has said he has reason to hope that an agreement covering the transfer of authority in Gaza and Jericho to the Palestinians can be reached at the Cairo meeting. However, Israeli Prime Minister Yitzhak Rabin says further talks may be necessary.

After talks in Davos, Switzerland, Arafat and Peres said a compromise had been reached covering all the major points which have so far held up an agreement, including control of the border crossings and the size of the Jericho area. The border crossings between the new Palestinian entity and Egypt and Jordan are expected to have a discreet Israeli presence, and the Jericho area is likely to be about 34 square kilometres. The compromises are also understood to cover security boundaries around Jewish settlements.

Despite the positive account from the negotiaters, Rabin said on 1 February that none of these issues had yet been agreed. He said it would take weeks before an agreement enabling an Israeli withdrawal could be reached.

How the two sides see the Palestinian entity's future status has increasingly become a focus of attention. Peres said on 1 February that Arafat had spoken of a confederation with Jordan at the talks in Davos, rather than concentrating on an independent state, an issue Tel Aviv has challenged. In the past, the PLO has said it would require an independent state first before it could think about any union.

However, Faisal al-Husseini, head of Arafat's Fatah movement in Jerusalem, has attempted to clarify the PLO chairman's remarks. Speaking on Israel Radio on 2 February, Al-Husseini said a confederation by its nature is a union between two states, and a confederation may be the most practical solution for a small Palestinian state.