Israel's Security Cabinet on Tuesday approved the deployment of European inspectors on the Gaza-Egypt border, a breakthrough in slow-moving talks on new security arrangements after the Israeli pullout from Gaza (search) and a precedent that could shape the economic future of the impoverished coastal strip.

However, several disputes still need to be settled before the border reopens and Gazans will be able to reap the first benefits of Israel's withdrawal from Gaza in September. The emerging deal follows several weeks of talks between Israel, the Palestinians, Egypt and international mediators.

Israeli Foreign Ministry spokesman Mark Regev (search) said the deployment of foreign inspectors was approved in Tuesday's special session of the Security Cabinet. Israel Radio said Vice Premier Shimon Peres would now begin talks with the European Union on the details of the deployment.

At issue is the Rafah terminal on the Gaza-Egypt border, the Gazans' main gate to the world, which was run by Israel until the withdrawal. In brokering new arrangements, U.S. mediator James Wolfensohn was trying to give the Palestinians maximum freedom of movement, while addressing Israeli concerns about a possible influx of weapons and militants into Gaza.

Under the deal presented to the Security Cabinet on Tuesday, international inspectors would be deployed at Rafah, in addition to Egyptian and Palestinian border personnel. Israel and the Palestinians still disagree on the authority of the inspectors — the Palestinians consider them advisers, while Israel wants them to have veto power.

Only Palestinians and foreigners with special status — VIPs, business people, aid workers — would pass through Rafah for now.

Israel wants to be able to monitor Rafah traffic via closed-circuit television, a demand the Palestinians reject.

"The third party is there for a reason, to monitor that we carry out our obligations," said Palestinian negotiator Saeb Erekat (search). "The Israelis have left ... There should be no camera linkage to Israel."

Regev, the Israeli Foreign Ministry spokesman, did not refer to the dispute over the presence of cameras, but said the emerging deal is fair.

"We think that these agreements reached with the Palestinians and the Egyptians are a good balance and provide a good framework, a win-win situation," he said. "The third party will be on the Palestinian side of the frontier, and will be there to help beef up the Palestinian security presence."

Israel, meanwhile, would operate an alternate crossing, Kerem Shalom, several miles away at the junction point between Egypt, Gaza and Israel. The crossing would handle goods and foreign tourists entering Gaza.

Palestinians say outgoing goods should move through Rafah, not Kerem Shalom, another point of dispute.

The Security Cabinet, a group of select ministers, approved the outlines of the deal, and gave negotiators the go-ahead to continue. Another round of Israeli-Palestinian talks was set for later Tuesday.

A breakthrough came last week when Israeli Defense Minister Shaul Mofaz said after a meeting with Egyptian President Hosni Mubarak that he accepts the deployment of foreign inspectors in principle.

Mofaz spoke several days after Wolfensohn complained in a letter to U.N. Secretary General Kofi Annan that Israel was dragging its feet in the negotiations. Without dramatic progress soon, a rare chance to revive Gaza's shattered economy — and the peace process — will be lost, Wolfensohn wrote. The stalling is preventing him from moving on to larger reconstruction efforts, such as tourism, agriculture and industrial projects, Wolfensohn said.

Israel closed the Rafah crossing on security grounds before withdrawing from Gaza.

After the pullout, thousands of Palestinians and Egyptians crossed in both directions for several days before Egypt and the Palestinians restored order. Since then, the Palestinians have briefly reopened Rafah for limited periods for hardship cases, such as Gazans seeking medical treatment.

Erekat said he hopes Rafah will reopen as early as mid-November, but would not say whether he expected the remaining disputes to be resolved quickly.

A reopening of the border could give Palestinian leader Mahmoud Abbas a badly needed boost as he heads into Jan. 25 parliament elections. His main political rival, Hamas, is expected to pose a strong challenge, and until now, Gazans have seen no real benefits from the Israeli departure.

Since the pullout, Israel has closed two Gaza crossings into Israel — Karni for cargo and Erez for workers — for extended periods because of security alerts, leaving the coastal strip virtually cut off from the world.