Israeli negotiators rejected Egypt's first formal proposals for Palestinian autonomy in Gaza and the West Bank today, setting the stage for a tough new round of talks presided over for the first time by U.S. special envoy Sol Linowitz.
The rejection was expected by U.S. officials, who said it should be seen as another salvo in a long series of negotiating exchanges rather than as a real setback in the nine-month-old talks under the Egyptian-Israeli peace and treaty.
Linowitz, who arrived here today, will head the U.S. delegation at negotiations Thursday and Friday. He conferred tonight with Interior Minister Yosef Burg, Israel's chief negotiator, and sees Prime Minister Menachem Begin on Wednesday.
Reporters were told Linowitz considers Egypt's presentation of a specific autonomy plan to be a major step forward. A plan offered by Israel last month was immediately rejected by Egypt. The U.S. officials explained that for the first time, Egyptians and Israelis will be talking this week about the substance of their dispute on the nature of Palestinian autonomy.
Under Linowitz's predecessor, Robert Strauss, the negotiators had been encouraged to avoid the most hotly disputed issues and to build an atmosphere of trust.
An Egyptian negotiating team headed by Ambassador Ezzett Abdul Latif formally proposed the Egyptian plan last night at a preliminary negotiating session. Israeli Interior Ministry Director General Chaim Kubersky said today it went beyond the Camp David accord and constituted a prelude to a Palestinian state.
As described by officials in Cairo, the Egyptian proposal would set up a Palestinian legislature of 80 to 100 members, underpinning an executive authority enjoying most of the powers now held by the Israeli military occupation authority.
In additioin, it would make about 60,000 Palestinian residents of East Jerusalem part of the autonomous West Bank and Gaza and headquarter the self-governing authority in the city.
Israel would have to rescind its annexation of East Jerusalem, declared after Israeli forces captured it from the Jordanians in 1967.
Under the Israel plan, the Palestinian self-rule authority would remain under the tutelage of Israeli occupation authorities and would handle limited administrative functions, leaving security, defense, foreign relations and financial exchanges in Israeli hands.
Linowitz said after his meeting with Burg that he is revolved to close the vast gap between the Egyptian and Israeli positions in intensive negotiations aimed at setting up elections for the self-rule authority before the May deadline. He has acknowledged, however, that the deadline may not be met.
Officials traveling with Linowitz say privately that President Carter probably will have to intervene personally before any decisive progress is possible.
As the Israelis were announcing their rejection of the Egyptian proposal, 13 Jewish settler families were complying with the Supreme Court ruling of 100 days ago by pulling out of their West Bank settlement at Elon Moreh -- the first case of Israel abandoning an established settlement in that occupied area.