WASHINGTON, Jan 27: Israel and the Palestinian Authority accept president Bill Clinton's step-by-step strategy for further peacemaking but the two sides remain far apart on terms of a settlement, the State Department spokesman said Monday, reports AP.

The hard decisions - how much land Israel would give up and what security steps the Palestinians would take - have not been made, spokesman James Rubin said at the department's daily news briefing.

The strategy Clinton outlined separately to Prime Minister Benjamin Netanyahu and Palestinian leader Yasser Arafat at the White House last week calls for Israel to give up West Bank land in phases, with the Palestinians providing matching security moves.

"There is a conceptual acceptance of this parallel approach ... as a way to put the peace process back on track," Rubin said.

Secretary of State Madeline Albright followed up in a telephone conversation Sunday with Netanyahu.

"Their conversation was focused almost exclusively on the Middle East peace process," Rubin said.

The next step in US peacemaking may be to set up a joint meeting in Europe with Netanyahu and Arafat, with Albright as the mediator. In the meantime, she has begun consultation with other governments on a growing possibility the United States will attack Iraq unless it permits UN weapons inspectors access to suspect sites.

This could scramble any plans Albright may have made to travel.

Still, Rubin said, "Believe me, I'm not going to rule out there will contacts with a friend as close as Israel is, if we get to another phase or even before we get to that phase (in Mideast peacemaking)."Reuter adds: The US State Department said on Monday it believed both Israel and the Palestinians had accepted a new US approach to Middle East peacemaking, even though they still differ on basic issues.

"We believe the two parties are now grappling in a serious way with the ideas we put forth," a spokesman said after President Bill Clinton last week met Israeli Prime Minister Benjamin Netanyahu and Palestinian President Yasser Arafat.

"There are still major gaps on very important particular issues," spokesman James Rubin told a news briefing. "But we do believe that the construct, the concept the president laid down ... is one that both parties have accepted on principle."

Major issues dividing the sides include the extent of a proposed Israeli troops withdrawal from the West Bank and the scale of a Palestinian crackdown on guerilla violence.

Clinton proposed that the troop withdrawal take place in phases, with each step matched by a new Palestinian action to improve security.

"Now the problem is to get closure on the gaps that still exist on how much territory would be transferred, on what parallel security steps must be taken, on which territory must transferred, and on when that territory must be transferred," Rubin said.

He said that would require "hard decisions" by the parties, and that US Secretary of State Madeleine Albright who spoke with Netanyahu by telephone on Sunday, would be pursuing talks with regional leaders.

Albright is widely expected to travel soon to Europe, and possibly also the Middle East, for talks focusing at least partly on the arms inspection crisis with Iraq, but which may also take in the Israeli-Palestinian issue.

Clinton's separate talks with Netanyahu and Arafat in Washington last week were widely seen in the Arab world as having produced little progress, and Arafat has called for an Arab summit to discuss the situation.

Peace talks have been deadlocked since last March when Israel broke ground on a housing project in traditionally Arab East Jerusalem.