The Palestine Liberation Organization is holding indirect talks with Israel aimed at achieving a cease-fire in south Lebanon, PLO chief Yasser Arafat was quoted Saturday as saying.

He also proposed establishing a common market of Middle Eastern nations, including Israel, as a way of guaranteeing a lasting peace in the region.Arafat spoke in an interview with the CBS News program "60 Minutes," which will be broadcast Sunday night. A transcript of the interview was issued Saturday.

Arafat said Israel had asked for a truce in south Lebanon, from which guerrilla groups have tried to infiltrate Israel, and "it is serious talk."

He said the channels being used include PLO representatives in the occupied territories in Israel, European diplomats and diplomats at the United Nations.

Arafat said Israel wanted the PLO to agree to the same terms they had reached before Israel invaded Lebanon in 1981.

"They are asking me to repeat the same truce," he said. "They are asking for a truce, ceasing fire, truce."

Arafat has often said that he is in contact with Israeli authorities, but Israel has always denied it.

Recent guerrilla attempts to infiltrate Israel from south Lebanon have been staged by pro-Iranian or Damascus-based groups not under Arafat's control. Israel, however, holds him responsible for them.

Also in the interview, the PLO leader proposed establishing a common market of Middle Eastern nations, including Israel, Jordan and Lebanon.

"You think that peace is only a paper? Peace has to be implemented . . . joint ventures, another Marshall plan in the area," he said.

Arafat said the idea would need the support of the United States, Europe, the Soviet Union and Japan.

"International coordination (is needed) to implement real peace in this area. And this is the main guarantee for the lasting, comprehensive, just solution," he said.

The PLO chief also said he would like to meet with Secretary of State James Baker to discuss Baker's warning that attacks on Israeli soldiers or civilians by Palestinian guerrillas deeply troubled the Bush administration.

Arafat said he would like Baker to say the same thing to Israeli forces "who are occupying my country and making daily aggression against our children, against our women, against our masses, against our children."