Palestinian leader Yasser Arafat said Tuesday he was ready to hold truce talks in Berlin with Israeli Foreign Minister Shimon Peres, who has proposed that a cease-fire be implemented gradually, in quiet regions first.

Two hours after Arafat spoke, a bomb exploded next to a parked car near the Russian Compound police headquarters in downtown Jerusalem, setting the vehicle on fire, police said. There were no casualties. A second bomb was found inside the car, authorities said.

There was no immediate claim of responsibility. Islamic militants have carried out dozens of bombings in nearly 11 months of Israeli-Palestinian fighting.

In the West Bank town of Ramallah, Arafat met with German Foreign Minister Joschka Fischer. In a joint news conference, Arafat suggested Berlin as a venue for cease-fire talks with Israeli Foreign Minister Shimon Peres, and Fischer seemed taken by surprise.

Fischer said he was ready to host such talks, but suggested there might be other venues. "If there is a need of a direct meeting between you, Mr. President, and the foreign minister, we think it is a very good idea," he said.

"If this should happen in Berlin, in the office, the door will be always open, but I think there are some other places not so far away in regional distances," Fischer said. "But this is a good idea."

Peres, who is visiting Hungary, said he intended to meet with Arafat soon, but suggested that a date for a meeting has not yet been set. "When I get home, we will have to discuss this," he said in Budapest.

Peres had said earlier this week that a meeting was "visible on the horizon," but details had not been worked out.

Israel radio said Tuesday that Peres and Arafat would meet early next week in Berlin.

The foreign minister, who is the leading dove in Israel's center-right government, has been given permission by Prime Minister Ariel Sharon to try to negotiate a truce with the Palestinians.

Peres has not confirmed or denied reports that he proposes a gradual cease-fire that would first be implemented in relatively quiet areas of the West Bank and Gaza Strip.

Fischer met with Peres on Monday, and with Sharon on Tuesday. Sharon made no reference to a possible Peres-Arafat meeting, saying only that he asked Fischer to help bring an end to the violence.

In his meeting with Arafat, the German suggested that the Palestinian leader agree to a meeting with the Israeli foreign minister.

Arafat told the news conference he welcomed Fischer's suggestion. "I prefer to hold the meeting with Shimon Peres in your office in Berlin, if you accept."

Peres and Arafat last met June 29, when both attended the Socialist International, a gathering of Socialist party leaders, in Lisbon, Portugal. The two have spent many hours together in recent years in negotiating interim peace accords, including Israel's partial withdrawal from the West Bank town of Hebron.

It was not clear whether renewed Peres-Arafat talks would be successful. Suspicion runs high after months of fighting that has greatly eroded the interim peace deals.

Previous truce efforts have failed, including a cease-fire agreement negotiated by CIA chief George Tenet in June.

Fischer has assumed the role of Mideast mediator once before. Following a June 1 suicide bombing at a Tel Aviv disco in June that killed 21 people, Fischer, who heard the blast from his hotel window, persuaded Arafat to call a cease-fire to avoid Israeli retaliation. However, the terms of the truce, worked out with U.S. mediation, never took hold.

In overnight clashes, 11 Palestinians were injured by Israeli army fire in the West Bank and Gaza, one critically.

At the United Nations, meanwhile, the United States made clear Monday it would not support Arab efforts to get Security Council endorsement for a resolution dealing with the Middle East crisis.

Without backing from the United States -- a veto-wielding member of the council -- it was unlikely that a draft resolution circulated by the Palestinians last week would go for a vote in the council.

The draft, backed by Arab and Muslim states, calls for an end to the Israeli takeover of Orient House -- the unofficial Palestinian headquarters in east Jerusalem -- an immediate cessation of violence and the creation of a "monitoring mechanism," which Israeli opposes.