Israeli Prime Minister Ehud Olmert told Palestinian President Mahmoud Abbas yesterday that he would unfreeze $100 million in withheld tax funds and remove some checkpoints in the occupied West Bank, officials said.
Mr Olmert and Mr Abbas - holding their first formal talks at the start of what officials said would be a series of meetings - also agreed to try to restart peace talks but reached no breakthough on freeing Palestinian prisoners.
Peace negotiations collapsed in 2000, and a Palestinian uprising erupted soon after. Hopes of reviving talks appeared all but dead when the Hamas Islamist movement took power in Gaza and the West Bank in March. But Israel has been under pressure from the United States and the European Union to take steps to support the moderate Abbas since he called for early Palestinian elections, a move that Hamas has rejected as a "coup" and unconstitutional.
"Both leaders reiterated their commitment to reviving a meaningful peace process that would lead to a two-state solution," senior Abbas aide Saeb Erekat said after the two leaders met for two hours at Olmert's Jerusalem residence.
Mr Abbas had been expected to press Israel to release Palestinian tax revenues that were withheld when Hamas took office. The funds currently amount to $500 million. "The money itself will not be transferred to the Hamas-led government and right now we are looking for the right way to be able to transfer the money ... for different humanitarian issues," Olmert's spokeswoman Miri Eisin said.
Mr Abbas had hoped to use any freed up tax revenues to pay government workers, who have not received full wages since March.
Mr Erekat said the leaders agreed to form a committee to work out categories for freeing Palestinian prisoners, though Israeli officials said there would be no releases until an Israeli soldier held captive in Gaza was freed first.
Mr Olmert has said he would be willing to release many Palestinian prisoners including long-term detainees, but only if militants in the Gaza Strip free Corporal Gilad Shalit, who was seized in a cross-border raid in June.
Ms Eisin restated that position. "At the moment there is no talk of release of prisoners until Shalit is released," she told reporters.
Corporal Shalit's kidnapping prompted Israel to launch a five-month offensive in Gaza that ended with a shaky truce in November. Ms Eisin said that if the Palestinians could end violations of the truce, discussions could begin on extending it to the West Bank. Palestinian militants in Gaza have fired some 50 rockets at the Jewish state since the November 26th ceasefire.
Mr Abbas and Mr Olmert met informally on the sidelines of a conference in Jordan earlier this year, but the Palestinian president's last formal meeting with an Israeli prime minister was in February 2005 when Ariel Sharon held the post. Mr Olmert replaced Sharon as prime minister in January after Sharon suffered a massive stroke.