He took the action in response to a new US law which called for the city to be regarded as Israel's capital, sparking anger among Palestinians.

Protests continue in Ramallah and elsewhere against military curfews

The fresh tension over Jerusalem comes as the foreign policy chief of the European Union, Javier Solana, arrives in Israel for talks.

Sporadic violence has also continued in West Bank towns, with a fifth Palestinian child being killed in confrontations with Israeli troops in two weeks.

Embassy change demanded

US President George W Bush signed the new provision on Jerusalem as part of a much broader bill allocating the budget to the State Department.

He insisted that US policy towards the status of Jerusalem - claimed by both Israel and the Palestinians had not changed.

The US says the status of Jerusalem has to be decided as part of a permanent solution between the Palestinians and Israel.

The fifth child to die in two weeks was killed during a confrontation in Nablus

But the law, in which the US Congress demanded that the US embassy be moved from Tel Aviv and for Jerusalem to be listed as the Israeli capital in all official documents, provoked protests among Palestinians.

Mr Arafat called its signing a "catastrophe", and Palestinians and Arabs saw it as a biased move backing Israel's claims to the city which they want as the capital of a future state and as the centre of Palestinian legislative, judicial and executive authorities.

The new Palestinian law on Jerusalem is itself almost wholly symbolic, correspondents say, as Israel retains full control of the city it annexed in 1967.

On Saturday, a 15-year-old died as youths defied military curfews in the town of Nablus and hurled stones at Israeli army jeeps and tanks. The soldiers inside then opened fire on them.

Four other Palestinians aged between 10 to 15 have been killed by Israeli gunfire in and around Nablus in the last two weeks, during which time an Israeli soldier and two Palestinian adults have also died.

Talks planned

Mr Solana is scheduled to hold talks on Sunday with Israel's Defence Minister Binyamin Ben-Eliezer and Foreign Minister Shimon Peres, and on Monday with Mr Arafat.

He will be pushing the "road map for peace" developed earlier this year by the so-called Quartet, comprising leaders from the EU, United Nations, US and Russia.

Mr Bush meanwhile will meet Israeli Prime Minister Ariel Sharon later this month, an administration official announced.

Israeli radio said Mr Bush, Israel's staunch ally, had invited Mr Sharon for what will be his seventh visit since assuming leadership of Israel in March last year to discuss possible conflict in Iraq.