Israeli leader Ariel Sharon's reported go-it-alone peace plan is a recipe for disaster, Palestinian Prime Minister Ahmed Qurie said in an Israeli newspaper interview published yesterday.

"The conflict would continue, fires would burn, terror would increase and no one would gain. It would be a bad mistake to force a settlement on us. We will not accept it. The world will never accept it," Qurie told the masscirculation Maariv daily.

Violence, meanwhile, erupted in Rafah refugee camp in the southern Gaza Strip, where three Palestinians -- a gunman and two civilians -- were killed during battles with an Israeli incursion force of 20 armored vehicles, medics said.

An Israeli military source said troops on a mission to detain a wanted man had returned fire toward gunmen who attacked them. Local medics said at least eight Palestinians were wounded.

Bloodshed has stalled a US-backed peace "road map" and

Palestinians fear Sharon's ideas -put forward as a unilateral alternative if the plan fails -- would leave them a shrunken state inside an internationally condemned Israeli barrier.

Sharon has publicly raised the possibility of uprooting some isolated, hard-to-protect Jewish settlements, leading to speculation he would then chart the borders of a Palestinian homeland along the barrier dipping deep into the West Bank.

"If Sharon wants to remove the settlements, fine. We will not stop him from taking down Netzarim," Qurie said, referring to a settlement on the edge of Gaza City whose stand-alone location makes it an apparent candidate for removal.

"(But) you cannot build a fence on our land, put us into cages like chickens and hope for the best. It will cause a disaster," Qurie said.

Israel says the West Bank barrier, still under construction, of razor wire fencing and concrete walls is necessary to stop Palestinian suicide bombers from reaching its cities.

"If you want a fence, fine. Build it on the Green Line," Qurie added, referring to the de facto border between Israel and the West Bank before the 1967 Middle East war, which would give Palestinians more territory.

"In that case, we would be prepared to share the construction costs with you."

Foreign ministers from both sides said bilateral talks could still resume with a meeting between Sharon and Qurie if terms are right.

"I think it is possible," Qurie said, referring to chances for a peace agreement with Sharon. "There has to be an immediate return to the negotiating table."

The interview appeared a day after Yuval Shteinitz, head of parliament's Foreign Affairs and Defense Committee, said Sharon had outlined a "long-term redeployment" as an alternative to a peace deal and it was accepted by most lawmakers of their Likud party.

Support by the right-wing party would be crucial to pushing through any such proposal. For

decades Sharon, a former general, has championed settlements as key to Israel's security.

Maariv reported Wednesday the "Sharon plan" would mean evacuating five smallish settlements by next summer.

AFP adds: Five Palestinians were killed Thursday in a major Israeli operation to hunt down militants in southern Gaza, as Palestinian premier Ahmed Qorei warned Israel of a flare-up if the construction of a controversial barrier was not halted.

Israeli troops backed by helicopter gunships thrust into the refugee camps of the town of Rafah in an incursion launched before dawn to capture wanted leaders from the Hamas and Islamic Jihad hardline groups.

According to military sources, the troops wrapped up the operation shortly before noon (1000 GMT) after capturing a member of Islamic Jihad, wanted over arms smuggling through tunnels running under the nearby border with Egypt.