TUNIS, March 28: Wrong-footed Arab governments scrambled on Sunday to rescue a summit that had been touted as a chance for them to embark on democratic change until host Tunisia announced it was calling it off at the 11th hour.

Egypt swiftly offered to host a replacement summit at an unspecified date, with Jordan and Yemen accepting its proposal, but Tunisia later muddied the waters by insisting it still had the right to stage the gathering.

Arab foreign ministers who were in Tunis to prepare for the summit's Monday opening said they were stunned when the Tunisian government told them late Saturday it was indefinitely postponing the event because of differences over political reform.

By late Sunday, many of the ministers had already left on flights from the airport outside Tunis, an AFP photographer said. The stakes for the summit had been especially high as Washington was pushing for reform as part of its war on terror, while angry Arab peoples demanded their authoritarian governments do more to defend the Palestinians against Israel and to end the US-led occupation of Iraq.

Arab League chief Amr Mussa, who was confident the ministers would settle their differences on political reform and other issues, said Tunisia's decision will have dangerous consequences for joint Arab action".

Mussa said in a statement carried by the Egyptian news agency MENA that the Arabs shared collective responsibility for the failure, not just Tunisia. He later welcomed an offer by Egypt to host a rescheduled summit, after Cairo expressed its "astonishment and regret" at the postponement.

Several thousand students demonstrated at universities across Egypt over the summit flop, accusing leaders of 'dishonouring Hamas founder Sheikh Ahmed Yassin who was assassinated by Israel last Monday.

Palestinian negotiations minister Saeb Erakat, meanwhile, warned the postponement would encourage Israel to take "even bigger or large-scale actions against the Palestinians," in the wake of the assassination.

The new Hamas leader, Abdelaziz Rantissi, said the Arabs had failed to "rise to the challenge" posed by Yassin's death. In Al Quds, a senior Israeli official welcomed the collapse as "a positive sign which shows that the Arab world is changing and that hostility to Israel is no longer a sufficient common denominator."

The speaker of the Lebanese parliament, Nabih Berri, said "the summit's cancellation was a second death blow for Sheikh Yassin" as the Arab states "gave Israel a way out of the crisis."

Lebanon, the Palestinians and Syria had demanded that a united Arab front against Israel over the killing take top billing at Monday's aborted summit, over US-led demands for political and economic reform.

Qatari political analyst Mohamed al-Musfir said Arab confidence in their leaders would sink to a new low with Tunisia's decision, which delegates said was the first time an ordinary summit had been called off at such a late stage in the Arab League's nearly 60-year history.

The United States had expressed hope Arab leaders might agree on a common reform plan during their summit here, while insisting the "Greater Middle East Initiative" it expects to unveil at a G8 summit in June was not an attempt to impose its own ideas for democratic change.

Arab ministers said they were not only stunned by Tunisia's decision but also rejected its explanation for it, as they had expected to reach agreement on proposals for reform sponsored by Egypt, Jordan, Qatar, Yemen and Tunisia.

"We had reached the last phrase of the document on Arab reforms and, contrary to what Tunisia claims, the remarks and amendments it proposed were included in the document by the drafting committee," one minister told newsmen.

An official English translation of the Tunis cancellation statement cited "differences" over proposals Tunisia had presented, which "it considers substantial and of great importance as to the process of development, modernization and reform in our Arab countries."

Tunisia had for months been reticent about holding the summit amid fears that Arab leaders would fail to halt the bickering that has marred previous summits, including a row at last year's gathering in Egypt between Libyan leader Moamer Qadhafi and Saudi Crown Prince Abdullah bin Abdel Aziz. -AFP