The Palestine Liberation Organization is considering setting up a "provisional government" in the Israeli-occupied West Bank despite Israeli threats to crush any such attempt, senior aides to PLO leader Yasser Arafat say.

In interviews published Sunday in Paris and Baghdad, Iraq, the officials also said the PLO is ready to recognize Israel and end hostilities against it in return for Jerusalem's recognition of a Palestinian state.Middle East experts said the comments, which came as Jordanian and PLO officials concluded three days of talks in Amman on the future of the occupied territories, reflected a significant shift in the PLO's stance.

The Amman meetings ended with the PLO delegation expressing "full support" for a decision last month by Jordan's King Hussein to sever administrative and financial ties with the West Bank.

Arafat will announce the birth of an independent Palestinian state in the occupied territories in September before the European Parliament, a semi-official Egyptian news agency based in France said Monday.

The Middle East News Agency quoted a PLO official as saying the declaration will be based on the U.N. General Assembly's 1947 plan to partition what was then the British-mandate territory of Palestine into separate Arab and Jewish states.

"Arafat will make a speech to the parliament in which he will declare the establishment of an independent Palestinian state," the source said.

In an article in the Paris newspaper Journal du Dimanche, Abou Iyad, a co-founder of Arafat's mainstream Fatah movement, said the PLO was "thinking seriously about creating a Palestinian state, endowed with a provisional government, established legitimately."

He said it would not be a "government-in-exile, but a provisional government" for the West Bank, which along with the Gaza Strip has been the scene of an eight-month Palestinian uprising against the 21-year Israeli occupation.

Israeli Prime Minister Yitzhak Shamir has vowed to crush any attempt by the PLO or other groups to create an independent Palestinian government in the occupied territories.