The mayor of Bethlehem, in a Christmas message, proposed a one-year truce between the Jewish state and Palestinians struggling against Israeli occupation.

Mayor Elias Freij also said Saturday that he hopes Israel would accept the "land for peace" formula in Middle East peace talks."We hope the (Israeli) government will become more realistic and accept territory for peace, rather than the concept of territory with peace," he said on Israel radio.

He proposed a U.N.-sponsored agreement to end violence in the occupied territories and clashes between the Israeli and allied forces and Palestinian guerrillas in Lebanon.

"The Palestinians would be happy to accept a honorable truce. It would be a great moral victory for them," he said in an interview published Friday in the weekend edition of the Jerusalem Post daily.

Freij proposed that the truce be signed by Israel and PLO chief Yasser Arafat. Israel's new coalition government rules out talks with the PLO, which it considers a terrorist organization.

Under Freij's proposed accord, the yearlong Palestinian rebellion against Israeli rule in the occupied West Bank and Gaza Strip would come to a halt.

At least 333 Palestinians and 14 Israelis have been killed since violence broke out in the occupied lands on Dec. 8, 1987.

In return, Freij said, the bulk of Israeli troops would have to withdraw from these territories, which Israel captured in the 1967 Middle East war.

Israel would also release 1,450 Palestinians now held in administrative detention, reopen 20 universities and colleges in the occupied lands, cancel expulsion orders against Palestinians and stop the practice of house demolitions as punishment for guerrilla activities.

"We have to be more optimistic, that next year there will be more hope," Freij told the radio.

He spoke as Christmas Eve began in the Palestinian city of 35,000, the birthplace of Jesus, and carols reverberated over loudspeakers across Manger Square. But Christian pilgrims were discouraged by drenching rain, heavy Israeli security and Palestinian general strike.

In the newspaper interview, Freij was quoted as saying his idea could lay the groundwork for an international peace forum leading to an agreement "on internationally defined borders where both Israel and Palestine each can live in peace."

Israel has raised different interim ideas to launch peace talks, ranging from elections in the occupied lands to choose Palestinian negotiators acceptable both to it and the PLO, to unilateral autonomy or limited self-rule for Palestinians.

But it says violence in the West Bank and Gaza must stop before any such negotiations start. Arafat, on the other hand, has said repeatedly that the Palestinian uprising will continue as liberation struggle.

Prime Minister Yitzhak Shamir said on Israeli radio that he didn't know of "any member of this government who accepts negotiations with the PLO. What we are seeking is direct negotiations with various Arab countries and the Palestinian Arab population."