Palestinian leader Yasser Arafat has agreed to appoint a prime minister - a key demand by the US and international mediators for progress on a political settlement.

Arafat did not make concessions to the United States Saeb Erekat Palestinian negotiator

However, Mr Arafat did not name a prime minister, set a date for the appointment or say how much power he would share.

The BBC's Barbara Plett says the US, Israel and the European Union, have been insisting that Yasser Arafat hand most of his powers over to another leader.

His announcement came after talks with envoys from the European Union, the UN and Russia at his headquarters in the West Bank town of Ramallah.

Mr Arafat said he would convene the Palestinian legislature and central council "to get their consent to take the necessary steps" to name a prime minister.

He did not say when the two institutions would meet.

Discontent

In June US President George W Bush called for a new Palestinian leadership that was "not compromised by terror".

Most Palestinians have never known another leader

However one of Mr Arafat's senior negotiators, Saeb Erekat, denied that Mr Bush's views influenced the Palestinian leader.

"Arafat did not make concessions to the United States," he told AFP news agency.

"His decision is consistent with our reform program."

Israel - and an increasing number of ordinary Palestinians - also support appointing someone to run daily affairs in the Palestinian territories.

Mr Arafat has been the undisputed leader of the Palestinian movement since the 1960s.

But there have been allegations of corruption and incompetence within his Palestinian Authority - as well as infighting apparently encouraged by Mr Arafat as a way of preventing any of his deputies from becoming too powerful.

Cold shoulder

Israeli Prime Minister Ariel Sharon has refused to deal with him, calling him both a leader of Palestinian terrorism and "irrelevant".

On Sunday, he again accused Mr Arafat of being behind attacks on Israeli targets and called for his removal as leader.

But it has been revealed that Mr Sharon recently held his first direct talks with senior Palestinians for nearly a year.

He met Palestinian parliament speaker Ahmed Korei in early February.

Mr Sharon reportedly offered an Israeli pull-out from Palestinian areas where militants are being reined in by Palestinian police.

Mr Korei is one the moderate Palestinians regarded as potential prime ministers.