Palestinian Prime Minister Ahmed Qurie faced a Tuesday deadline to resolve differences with Palestinian President Yasser Arafat blocking confirmation of a new cabinet seen as crucial to peace moves.

Qurie's 30-day emergency mandate expires at midnight on Tuesday. But a meeting he had with Arafat on Monday to resolve a paralyzing dispute over security powers for his cabinet ended inconclusively, officials said.

Senior Palestinian officials speaking privately suggested the main hitch was Arafat's opposition to Qurie's choice of General Nasser Yousef for the powerful post interior minister with authority over the security forces.

Hassan Abu Libdeh, the director of Qurie's office, said the prime minister wanted his Interior Ministry to have strong security credentials, as his first order of business was to try to get militants to agree to a truce with Israel.

Efforts to salvage a tattered "road map" peace plan, backed by the Quartet comprising the United States, European Union, Russia and the United Nations, depend in part on Qurie forming a stable government after weeks of Palestinian infighting.

Whether or not the dispute is resolved, Qurie is expected to convene his emergency cabinet for a final meeting on Tuesday.

Arafat had named Qurie, also known as Abu Ala, as premier early in October after Mahmud Abbas, stymied by Palestinian infighting and continued Israeli military raids and blockades from consolidating power, resigned.

Qurie, 65, an architect of an interim peace deal with Israel in 1993, had set up an emergency cabinet in response to Israel's tightened military blockade of the West Bank and Gaza Strip after 22 people died in a suicide bombing in the city of Haifa.

MEET KEY 'ROAD MAP' DEMAND

By forming a permanent government, Qurie would meet a key demand of the stalled "road map," which includes calls for Palestinian reform measures and a crackdown on militant attacks against Israel.

The plan is a formula for ending violence in which more than 3,000 Palestinians and Israelis have died in the three-year Palestinian uprising, with the establishment of statehood in the West Bank and Gaza by 2005.

Despite the obstacles Qurie faces, Israeli leaders sounded a note of cautious optimism about the prospects for him setting up a permanent government.

Prime Minister Ariel Sharon was quoted as telling reporters in Moscow, where he had talks with Russian President Vladimir Putin, that he hoped to see a new Palestinian leadership that could "act with us to honestly implement the road map."

Sharon urged Putin to drop a Russian-introduced motion for a U.N. resolution behind the road map, which Israel fears could undermine the U.S. role in implementing the plan, a senior Israeli official said.

Israel's Haaretz newspaper reported on its Web Site that Sharon also said in Moscow that he soon expected to see a Palestinian leadership that would work with Israel. "When that happens, they will find us to be a serious partner," he said.

Sharon said at the weekend that he was ready to negotiate with Qurie once he consolidates his position. In response, Qurie indicated he was also open to holding such a meeting.

Israeli Defense Minister Shaul Mofaz said he hoped to "start a dialogue" with Qurie as soon as he set up a permanent cabinet, and that he had already laid the groundwork by holding a series of contacts with Palestinian officials in recent days.

Israeli media said Mofaz had had talks with Palestinian Finance Minister Salam Fayyad.

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