Israeli Prime Minister Ariel Sharon plans to withdraw Israeli troops from Palestinian cities in the West Bank and evacuate settlement outposts in the coming weeks, Israel's Channel 2 television said on Friday.

Sharon said on Thursday Israel would have to give up some occupied land for peace, but also raised the possibility he would take unspecified "unilateral steps" should talks with the Palestinians on advancing a U.S.-backed peace plan fail.

Channel 2 said the first phase of Sharon's two-phase plan would involve trying to move forward on the peace "road map" by evacuating settlement outposts, removing checkpoints and withdrawing from occupied West Bank cities.

It said that in the second phase -- planned if the road map failed to bring about peace -- Sharon would unilaterally determine a border, which would leave Palestinians with less than 40 percent of currently occupied territory, and complete an extension of a barrier around the eastern West Bank.

Channel 2 said Sharon was effectively telling Palestinian Prime Minister Ahmed Qurie: "This is your last opportunity to negotiate with me."

Israeli officials declined to comment on the report.

Israel committed to evacuating unauthorized settlements under the road map, but has done little to prevent settlers from establishing new outposts since the launch of the peace plan.

Sharon faces growing calls at home as well as abroad for bold action to end three years of violence and bolster the status of Palestinian moderates against militants, by reining in settlers and lifting blockades imposed on Palestinian cities.

The United States said on Tuesday it was penalizing Israel for the barrier and settlement expansion by deducting nearly $290 million from a multi-billion-dollar package of loan guarantees.

Palestinians say the barrier, a line of concrete walls, electric fences and razor wire, is a bid to annex their land.

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