A top Palestinian official said yesterday the Middle East peace process would pay a heavy price if Israeli Prime Minister Ariel Sharon forms a right-wing government after the fall of the country's coalition. Israel is about to form the most extremist government in its history, chief Palestinian negotiator Saeb Erekat told a news conference at the Formentor Forum in Majorca. I'm afraid the price will be at the expense of the peace process, at the expense of the Palestinian people. It will mean more settlement activity, more land confiscation, he said. Erekat's comments came as Sharon tried to form a narrow right-wing coalition after Labour party ministers resigned this week in a dispute over funding for Jewish settlements. Erekat said he would not be surprised if Sharon took advantage of a possible U.S. attack on Iraq to fully reoccupy the Gaza Strip and West Bank, destroy the Palestinian Authority and physically harm Palestinian President Yasser Arafat. He said Israelis and Palestinians needed the help of a third party more than ever before and also called for the United States, European Union, Russia and the United Nations to put monitors on the ground in the region. But Israel's outgoing Foreign Minister Shimon Peres, one of six Labour ministers who have resigned and whose term in the cabinet ended yesterday evening, took a more optimistic line. Peres, who is also at the Formentor Forum, said peace in the Middle East could be closer than people thought. In the spite of all the difficulties, I do believe that the conflict is solvable and if we don't lose the opportunity and our patience, we are within reach of a peace agreement, he said.