JERUSALEM, Feb 18: Israel's cabinet is set to endorse on Sunday a change to the route of its controversial West Bank barrier and the clearing of Gaza Strip and West Bank settlements, officials said on Friday.

The moves, which will further separate Israel from the Palestinians, come after Israel announced it was ending its policy of demolishing the homes of militants, a practice that was condemned by human rights groups as collective punishment.

In another measure, Israel said it would allow 16 Palestinians deported to the Gaza Strip on security grounds to return home to the West Bank this week. Israel has taken some steps to ease conditions for the Palestinians since a cease fire was agreed with new leader Mahmoud Abbas at a summit in Egypt 10 days ago.

The Haaretz newspaper speculated that the cabinet was considering the route change and Gaza pullout together in a bid to divert world attention away from the barrier, which the UN's International Court of Justice ruled illegal last July.

It said the modified path of the barrier would include around seven per cent of the occupied West Bank, excluding annexed east Jerusalem, compared with 16 percent initially.

The completion this year of the pullout, which will see the dismantling of all 21 Gaza settlements and four on the West Bank, and the barrier, will seal Israeli Prime Minister Sharon's declared intention to disengage from the Palestinians.

On Thursday, Israel ordered a halt to the demolition of the homes of Palestinian suicide bombers after an internal review found the policy had little deterrent effect and stoked hatred.

The Israeli Committee against House Demolitions group welcomed the decision, but denounced the fact it was a result of "a purely tactical evaluation of effectiveness. "It does not represent a gesture of reconciliation towards the Palestinians, or even an implicit recognition of international law," it said.

Another Israeli rights group, B'Tselem, published a report three months ago showing that for every house destroyed 12 innocent people were made homeless. It said 628 housing units - home to 3,983 Palestinians - were destroyed because of the acts of 333 Palestinian militants since Aug 2002.

DEPORTEES' RETURN: In other measures, Israel said it would allow 16 Palestinians deported to the Gaza Strip on security grounds to return home to the West Bank although the decision still had to be implemented at mid-day Friday.

Another 20 expelled from Bethlehem, including those involved in a siege of the Church of the Nativity in 2002, will be allowed to return after an agreement with the Palestinian Authority on the transfer of security control.

But the army said Israel would only allow the return of deportees who "have no blood on their hands". Palestinians will also be able to travel to Egypt via the Rafah crossing in the southern Gaza Strip.

The Israeli government's second in command, Shimon Peres, said on Friday that ministers from his centre-left Labour party would vote in favour of the revised barrier route. -AFP