The newspaper quoted sources close to the case as saying that negotiations between the two sides were floundering in part because Clinton was furious Jones' lawyers had claimed that any payment would amount to an implicit admission of his guilt.

David Pyke, one of Jones' Dallas-based lawyers, refused to comment on the Post report.

White House spokesman Jim Kennedy also had no comment on the report. Clinton's personal attorney, Robert Bennett, could not be reached for comment.

White House deputy counsel Bruce Lindsey said on Sunday the two sides were discussing a possible settlement of Jones' sexual harassment lawsuit. But if Clinton agreed to pay Jones money to settle the case, this would not signify an admission of wrongdoing, hesaid.

The White House is keen to settle the Paula Jones lawsuit so it can focus solely on likely impeachment hearings in Congress about Clinton's admitted improper relationship with former White House intern Monica Lewinsky.

But the Post, quoting people monitoring the talks, said both sides had grown ``increasingly pessimistic that they will be able to find an amicable deal'' and the next few days were considered critical.

Clinton's affair with Lewinsky was first unearthed by Jones' first set of attorneys as they attempted to show a pattern of behaviour by the President.

In his report to Congress, Independent Counsel Kenneth Starr accused Clinton of lying under oath in the Jones case when he denied having a sexual relationship with Lewinsky.

Jones is using that assertion - and Clinton's admission that he misled people about the affair - to try to revive the case which was dismissed in April.

Meanwhile, in New York, multimillionaire Abe Hirschfeld said he wanted to offer Jones one milliondollars to settle the suit.

Hirschfeld, a real estate developer, theatre producer and frequent political candidate, said he believed the lawsuit and Starr's investigation of Clinton had brought Washington ``to a complete standstill'' that was damaging the United States.

Federal judge Susan Webber Wright dismissed the Jones lawsuit in April, but a three-judge panel sitting in St. Paul, Minnesota, is scheduled to hear oral arguments on October 20 on whether the case should be reinstated.

Jones claimed Clinton asked her for oral sex in Arkansas in 1991, when she was a state employee and he was governor.

Clinton agreed to discuss a settlement after Jones dropped her longstanding demand for an apology, but a source told the Post he was enraged when her lawyers went on television talk shows last Sunday asserting that any settlement effectively would be the same as acknowledging her claims.