Declaring 2005 a year of opportunity, Prime Minister Ariel Sharon (search) held out the prospect of an independent state for the Palestinians if they stop violence and said he is ready to coordinate a Gaza pullout with them.

Sharon's speech was strikingly optimistic, a sign of change in the post-Yasser Arafat (search) era, but Palestinian leaders said it fell short of expectations.

In Gaza, fighting continued. Israeli troops raided the Khan Younis (search) refugee camp Friday after Palestinian mortar fire killed a Thai worker in a Jewish settlement and injured 17 people, including 11 soldiers, in the past week.

Three Palestinians, including at least one gunman, were killed in Friday's army raid. Bulldozers began knocking down buildings, and hundreds of Palestinians fled their homes for fear the army would demolish them.

Addressing an academic conference Thursday evening, Sharon said Arafat had been the main obstacle to peace and his death in November turned 2005 into a "year of great opportunity."

Sharon has signaled he would work with Arafat's successor, likely to be PLO chief Mahmoud Abbas (search), the front-runner in Jan. 9 presidential elections. Sharon said he would do his utmost to allow the vote to proceed, including redeploying troops.

"We stand before a unique window of opportunity. Who knows when we will have this opportunity in the future," Sharon said.

Sharon said he is determined to go ahead with the planned withdrawal from Gaza and four West Bank settlements in 2005, "with conviction and without hesitation." Sharon is in negotiations with the moderate Labor Party to join his coalition as a buffer against threats from hard-liners to bring him down.

The withdrawal is set to start July 3 and to be completed within three months. A final Cabinet vote on approving the pullout was initially scheduled for June.

However, Sharon adviser Asaf Shariv said Friday that the final vote might be held several months earlier, to allow for possible legal challenges and practical preparations. The Maariv daily reported that the vote could be held as early as January.

Withdrawal opponents hoped that with final approval still months away, they could topple Sharon or find another way to stop the plan. If Sharon decides to hold the vote in coming weeks, it could intensify opposition among hard-liners in his Cabinet.

Sharon said that the withdrawal could lead to future peace talks.

"This initiative is the foundation and cornerstone for the great opportunities which lie before us," he said. Addressing the Palestinians, he said: "We have no desire to rule over you. We have no desire to run your affairs."

When Arafat was still alive, Sharon insisted on a unilateral pullback, saying he had no Palestinian partner. On Thursday, he said he is ready to coordinate the withdrawal with the new Palestinian leadership.

Palestinian Cabinet minister Saeb Erekat said Sharon should have negotiated the Gaza plan with the Palestinians, but that the Palestinians welcome any withdrawal. "If Sharon wants to leave Gaza or any part of the West Bank we're not going to stop him and we stand fully ready to assume our responsibilities there," Erekat said.

Erekat also said negotiations on a final peace deal should resume quickly. The Palestinians fear that despite the conciliatory tone, Sharon will try to dictate the pace and delay the resumption of peace talks. Sharon has said he envisions a long-term interim deal with the Palestinians.

Sharon on Thursday held out the prospect of Palestinian statehood, provided the Palestinians stop militant groups from attacking Israel and carry out reform.

"For their part, the Palestinians can then also live in dignity and freedom in an independent state," he said without giving a timeframe.

Sharon also said Israel would seek to annex large Jewish settlements in the West Bank and keep all of east Jerusalem, the sector captured by Israel in the 1967 Mideast war and claimed by both Israel and the Palestinians as a capital.

The Palestinians want all of the West Bank, Gaza and east Jerusalem for their state.

Israeli commentators said they were struck by Sharon's conciliatory tone and said he sounded increasingly like veteran statesman Shimon Peres, architect of the interim peace deals with the Palestinians, and until recently Sharon's political rival.

After the collapse of peace talks in 2000, Peres was widely ridiculed in Israel for his insistence that a "new Middle East" of peace and coexistence remains possible.

Hamas spokesman Sami Abu Zuhri said Sharon's speech was a declaration of war "against the rights of the Palestinian people," and that the militant group would keep fighting occupation. Hamas has been responsible for dozens of bombings that have killed hundreds of Israelis during four years of violence.

Sharon praised Egypt for its intention to cooperate with the Israeli pullout from Gaza. He said if Egypt makes a concerted effort to stop Palestinian arms smuggling from Egypt into Gaza through tunnels under the border, Israel would withdraw from the patrol road — a key flashpoint in the conflict.

Near the Gaza-Egypt border, in the Rafah refugee camp, a weapons smuggling tunnel collapsed late Thursday, trapping six Palestinians, witnesses and officials said. Military officials said Palestinian officials informed the army that five bodies had been removed from the tunnel. Palestinian officials did not immediately confirm the report.

A few hours earlier, an Israeli helicopter fired a missile at a carpentry shop in the Rafah camp, which the army said was used to manufacture mortars.