Iraq on Friday accepted a U.S. offer to hold direct talks onthe Persian Gulf crisis Wednesday in Switzerland, and France offered a peace plan promising international talks on Mideast issues if Iraq pulls out of Kuwait.

The Iraqi acceptance came a day after President Bush offered to send Secretary of State James A. Baker III to Geneva for talks with Iraqi Foreign Minister Tariq Aziz.Aziz said the Baghdad government had informed Washington of its acceptance of the proposal to talk, the official Iraqi News Agency said. The foreign minister said Iraq would use the talks to stress its commitment to the Palestinian people's rights to a homeland.

The French peace plan, presented during a European Community foreign ministers meeting in Luxembourg, calls for a European-Iraqi meeting in Luxembourg, said a French official speaking on condition of anonymity.

It would also guarantee Iraq it would not be attacked if it agrees to withdraw from Kuwait, the official said.

There was no immediate action on the plan by the ministers, meeting in closed-door session. A German source said German Foreign Minister Hans-Dietrich Genscher endorsed the idea of European

Iraqi talks, but there was no word on other nations' reaction to the rest of the plan.

In Washington, Congress was resuming debate on the gulf crisis Friday, with some lawmakers favoring taking up a resolution stating that congressional approval is needed for any military action against Iraq. Others urge delaying a vote until the Bush administration ends it latest diplomatic efforts.

Congress will remain in session throughout January, canceling a three-week recess.

Meanwhile Friday, an Iraqi diplomat being expelled from Britain warned that Arabs living in Western countries will mount widespread sabotage attacks if war breaks out in the Persian Gulf.

"If Iraq is going to be attacked, all Western countries will have targets to be hit - and Britain has allied herself with the Americans in this warfare," press counselor Naiel Abdul-Jabbar Hassan told reporters at London's Heathrow Airport.

Britain on Thursday ordered the expulsion of eight Iraqi Embassy staff members and 67 other Iraqis, citing past Iraqi threats to attack Western targets if war breaks out.

In Baghdad, diplomatic sources said Friday that Iraq has told embassies to prepare to move out of the capital to temporary facilities in a city 65 miles to the west. Most embassies have only skeleton staffs remaining in Baghdad.

The New York Times, also citing diplomatic sources, said in Friday's editions that Iraq planned to move all its government functions out of the Iraqi capital prior to Jan. 15, the United Nations deadline for Iraq to withdraw from Kuwait or face the threat of war.

But the official Iraqi News Agency denied that government offices would be relocated outside the capital.

"These reports are fabricated and ridiculous . . . Baghdad is the capital of steadfastness and victory and will remain so, protected by its men under the leadership of President Saddam Hussein," the news agency said.

In unveiling the French proposal, Foreign Minister Roland Dumas told his EC colleagues that in view of the stalemate in the Persian Gulf, "Europe could not remain with its arms folded," said the French source.

The official quoted Dumas as saying European-Iraqi talks would constitute "no contradiction, nor interference" with the U.S. position, including Bush's offer to hold direct talks with Iraq.

Under the French plan, the EC-Iraq talks would be held between Aziz and Luxembourg Foreign Minister Jacques Poos, whose country holds the EC's rotating presidency, or between Aziz and the foreign ministers of Italy, Luxembourg and the Netherlands.

The reported French peace plan called for Iraq to leave Kuwait in accordance with U.N. Security Council resolutions. If Iraq agreed to leave Kuwait, the multinational force would pledge not to attack it, under the plan.

With Iraq out of Kuwait, all Middle East regional issues - including the Israeli-Palestinian conflict - would be open to discussion in one or more international conferences, the source said.

Saddam has repeatedly tried to link talks on the gulf crisis and talks on the Palestinian problems.

In other developments:

- Pan American World Airways has suspended flights to Riyadh, Saudi Arabia, and Tel Aviv because of drastically increased insurance rates. Other carriers have reduced service or changed flight schedules to the Middle East because of rising tensions.

- The Pentagon announced Thursday that vaccination of U.S. troops in the gulf, as protection against germ warfare by Iraq, will begin this week.

The Defense Department last month confirmed that it planned to vaccinate soldiers against unspecified germ warfare agents to offset a possible biological attack by Iraqi forces.