DATE=4/02/02

TYPE=CORRESPONDENT REPORT

TITLE=ISRAEL / PALESTINIANS 2ND UPDATE(L)(CQ)

NUMBER=2-288258

BYLINE=LAURIE KASSMAN

DATELINE=JERUSALEM

CONTENT=

VOICED AT:

/// EDS: BECAUSE OF CONFLICTING REPORTS,2 PARAGRAPHS BEFORE THE OPT, PLEASE CHANGE THE LINE : "An Italian priest was killed in the crossfire," TO MAKE IT READ: "The Roman Catholic Missionary Service News Agency says an Italian priest was killed during the fighting in Bethlehem -- but church officials later said the priest named in the report is alive. ///

INTRO: Israel's military offensive against Palestinian militants has intensified after troops and tanks invaded Bethlehem and other West Bank towns. Fighting was especially fierce in the center of Bethlehem and around the compound of Yasser Arafat's West Bank security chief on the edge of Ramallah. Correspondent Laurie Kassman in Jerusalem brings us up to date.

TEXT: ///shooting and fade ///

The sound of fierce fighting could be heard 10 kilometers away in a northern Jerusalem neighborhood, as Israel's military pounded away at the West Bank compound of Palestinian Security Chief Jibril Rajoub early Tuesday morning.

Mr. Rajoub said there were more than 300 civilians pinned down inside. Later in the day, Israel allowed most of them to leave, on condition they be questioned by authorities. Israel has accused Mr. Rajoub of harboring militants wanted by Israel and refuses to lift the siege until the suspects surrender.

In nearby Ramallah, Palestinian leader Yasser Arafat remains a virtual prisoner inside a few rooms of his office building. He has been confined there since Friday when Israeli Prime Minister Ariel Sharon ordered a military assault on the compound to isolate the Palestinian leader.

Prime Minister Sharon does not rule out expelling Mr. Arafat, if his cabinet would approve it.

/// SHARON ACT ///

It is going to be a one-way ticket. He would not be allowed to return.

/// END ACT ///

Mr. Sharon says Yasser Arafat would not be allowed to take anyone with him because, he adds, there are wanted people in there with him.

Mr. Arafat has remained defiant, telling Arab and foreign television he will never surrender or allow Israel to jail him or exile him.

Israel's Foreign Minister Shimon Peres echoes foreign diplomats who say Mr. Arafat should not be forced to leave the country.

While Israelis discuss Mr. Arafat's fate, tanks and troops have invaded Bethlehem and other West Bank cities in pursuit of Palestinian terrorists.

Heavy fighting in Bethlehem was concentrated in and around Manger Square, within meters of the Church of the Nativity, the traditional birthplace of Jesus. The Roman Catholic Missionary Service News Agency says an Italian priest was killed during the fighting in Bethlehem -- but church officials later said the priest named in the report is alive.

Church leaders in Jerusalem braved a driving rain storm to march to Prime Minister Sharon's official residence to protest the incursion.

/// REST OPT ///

Elsewhere, a curfew remains in effect in Ramallah. Soldiers fired warning shots at reporters who ventured out of their hotel to cover the fighting there. Israel has declared the area a military zone and told all journalists to leave the city.

The curfew has prevented hospital workers from transporting the dead for burial in the cemetery, so they have dug a temporary grave on the hospital grounds. But late in the afternoon Israel's military allowed the curfew to be lifted for four hours so residents could stock up on supplies. (Signed)

NEB/LMK/FC