GAZA CITY, Gaza Strip (AP) _ There's no such place as Palestine.

Legally and diplomatically, it doesn't exist. In the eyes of the world, if not the Palestinian people, it's a would-be country, a state of mind, a nation in waiting.

Now, Yasser Arafat says that wait is nearly over.

In a speech to the U.N. General Assembly on Monday, the Palestinian leader is poised to make his boldest bid yet to turn statehood dreams to reality a scant seven months from now.

For many Palestinians _ furious about stalled peace negotiations with Israel and desperate over their ever-worsening economic plight _ even a perilous step like this is better than leaving matters as they stand.

``It's time, it's time,'' said Abed Absi, 33, who runs a hole-in-the-wall garment factory in one of Gaza City's sprawling refugee camps. ``Look around _ even if we lose everything, what is it that we really lose?''

Arafat has said for months that barring some negotiating breakthrough, the Palestinians were likely to proclaim statehood as soon as the interim Oslo peace accords expire _ on May 4, 1999, according to the Palestinian interpretation.

Even if what he says on Monday doesn't differ greatly from previous Palestinian statements, the setting dramatically raises the stakes.

Until now, such talk largely has been viewed here as a Palestinian bargaining tactic, meant to prod Israel into moving ahead with long-delayed troop pullbacks.

But a direct appeal by Arafat for international support for an independent Palestine _ delivered from center stage at the United Nations _ carries far more symbolic weight.

And it comes come only four days after Israeli Prime Minister Benjamin Netanyahu used his own appearance before the world body to deliver a blunt warning to the Palestinians: Don't do it.

``Such actions will inevitably prompt unilateral responses on our part,'' Netanyahu said Thursday.

Israel hasn't said publicly what its reaction would be, but possible steps include annexation of West Bank and Gaza Strip land still under its control, plus an economic boycott of the fledgling state.

There is also considerable risk of violent confrontation. The military establishments of both sides _ in veiled but unmistakable language _ have acknowledged they are preparing for the possibility of all-out warfare.

The Palestinians know they are hopelessly outgunned, but take every opportunity to remind Israel that an impassioned popular uprising can stand up to overwhelming military superiority. The intefadeh, they say, proved that.

``We will fight to defend our state and existence by all means available,'' Palestinian intelligence chief Amin el-Hindi said last week.

Despite the dangers, the looming showdown already could be helping to break the long deadlock in Israeli-Palestinian negotiations.

It may be no coincidence that the only real movement in months comes as the Palestinians aggressively press their statehood cause: Netanyahu on Friday formally confirmed for the first time he was ready to accept a U.S. proposal for Israel to withdraw from an additional 13 percent of the West Bank.

Both sides have reasons for wanting to abandon the Oslo accords, and the statehood quarrel could provide a pretext for that.

Netanyahu has only grudgingly accepted the commitment to the Oslo accords made by Prime Minister Yitzhak Rabin, and the Palestinians have all but given up hope it can further their cause. Sticking with the process also has eroded Arafat's street credibility.

A wild card in the statehood maneuvering is Hamas, the militant Islamic group that opposes any peace with Israel and has killed scores of Israelis in suicide bombings.

Hamas says any statehood declaration that renounced claims to all of present-day Israel would be unacceptable, but the group's spiritual leader, Sheik Ahmed Yassin, said Palestinians shouldn't fight among themselves about it.

``Our enemy wants our Palestinian nation to have a civil war,'' he told a Hamas rally in Gaza on Thursday.

But money, not politics, could prove the greatest divisive force. Palestinian planners hope formal statehood will boost foreign aid and investment, but corruption and lack of accountability in Arafat's Palestinian Authority already may have cooled enthusiasm.

And statehood that failed to bring about real change in people's daily lives could be disillusioning, and thus dangerous. That already can be seen in Gaza, which has been self-ruled since mid-1994.

``With statehood, it'll be just like it has been so far with the Palestinian Authority _ only a few will see the fruits, and the rest of us will keep suffering,'' Gaza laborer Taysir Hamman said.

Arafat's personal agenda also could play a significant part in the larger political drama.

Aging and ailing, he has devoted most of his life to the Palestinian statehood struggle, and those close to him say he is driven by the profound emotional desire to preside over the birth of a nation.

Whipping up public support for May statehood could leave him unable to back down even if Israel offered some otherwise acceptable set of terms that slowed down the statehood timetable.

Israeli opposition lawmaker Yossi Beilin, a prime architect of the autonomy accords, went to Gaza last week to plead with Arafat not to push ahead with the statehood plan.

``I think both sides are not really ready for what will happen after the Palestinians make such a declaration,'' he said. ``I see the fourth of May as the beginning of a tragedy.''