JERUSALEM -- The opposition Labor party reported progress yesterday in stop-and-go coalition talks with Prime Minister Ariel Sharon of Israel, saying negotiators have produced a joint paper on the terms of a planned Gaza withdrawal.
But the two sides remain far apart on what Labor denounced as the government's ''piggish capitalism."
Sharon alienated much of his prosettler constituency and lost his majority in parliament when he decided to withdraw from all of Gaza and four West Bank settlements by late next year.
He is seeking to bring Labor and other parties into his government to reinforce his coalition and secure a Cabinet majority for the pullout, key to carrying out his plan of ''unilateral disengagement" from the Palestinians.
Labor, which favors steps more far-reaching than Sharon's withdrawal plan, is the main piece in the puzzle. Other parties might give Sharon a slim majority, but no other combination assures Cabinet approval of all stages of the pullout.
Labor leader Shimon Peres confirmed yesterday that negotiators from his party and Sharon's Likud party have reached agreement on the terms of the Gaza pullback and on general policy toward the Palestinians.
Interviewed by the Italian newspaper Il Secolo, Peres said his main demands were accepted, including a more detailed timetable for a Gaza withdrawal.
Peres also said Sharon was willing to consider coordination with the Palestinians. Sharon's negotiators ''agreed to see if they can find an effective Palestinian partner," Peres said.
Peres spokesman Yoram Dori said the Gaza understanding is not completed, and Sharon's advisers declined to comment.
A key principle of Sharon's plan is a refusal to coordinate with the Palestinians. Sharon maintains the Palestinian leadership is not moving to stop four years of violence. With his plan, he hopes to bypass the Palestinians, solidify his grip on parts of the West Bank, and hold off international peace initiatives.
Labor insists that Israel must continue negotiating with the Palestinians.
Under Labor's agreement with Sharon, published yesterday in the daily newspaper Yediot Ahronot, compensation payments for settlers would be accelerated, with payouts to begin as early as next week. Such payments could induce more settlers to leave voluntarily and weaken what is expected to be considerable settler resistance that might sabotage a withdrawal.
The document said West Bank settlement outposts would be dismantled immediately, in line with Israel's obligations under the US-backed ''road map." That peace plan requires taking down the outposts, halting construction in settlements, and disarming Palestinian militants on the way to creating a Palestinian state.
Wide gaps also remain on domestic issues in Israel.
Labor objects to the reform plan by Finance Minister Benjamin Netanyahu. The proposal includes welfare cuts and tax breaks for the wealthy to stimulate the economy. Yesterday, Netanyahu presented a $59 billion budget proposal, which includes a $1.3 billion spending cut.
Labor legislator Ofir Pines-Paz told Israel Army Radio, ''We will not sit in a government in which piggish capitalism is running rampant."
Sharon and Peres met yesterday evening to discuss the differences. Dori said Peres presented Labor's positions, and Sharon promised a quick reply after he holds consultations.
Elsewhere, an Israeli helicopter fired three missiles yesterday near the Rafah refugee camp in the Gaza Strip, witnesses said. No casualties were reported. Reuters cited Israeli military sources confirming that missiles were fired and saying it was a preventive measure to repel militants preparing to attack an army position.