Israeli Prime Minister Ehud Olmert met Palestinian President Mahmoud Abbas in the West Bank on Monday and voiced hope their talks would soon lead to negotiations on the creation of a Palestinian state.

After months of resistance, Olmert agreed to expand the scope of discussions with Abbas to include “fundamental issues” that are key to Palestinian statehood and ending the conflict, US and Palestinian officials said. But Israeli officials baulked at describing the session as an attempt to address so-called final-status issues such as borders and the future of Jerusalem and Palestinian refugees, saying the two leaders would seek instead an agreement on “principles”.

“I came here in order to discuss with you the fundamental issues outstanding between Israel and the Palestinian Authority, hoping that this will lead us soon into negotiations about the creation of a Palestinian state," Olmert said, with Abbas standing at his side, at the start of their talks in Jericho.

It was the first visit by an Israeli prime minister to a West Bank city since 2000. The meeting was held ahead of a US-sponsored regional conference slated for later in the year.

But it is unclear whether Olmert, whose popularity plummeted after last year's inconclusive war in Lebanon, can make major concessions -- particularly to uproot Jewish settlements in the occupied West Bank.

It is also uncertain how Abbas can deliver on any deal with Hamas Islamists, which is in control of Gaza and whose charter calls for Israel's destruction.

Ismail Haniyeh, prime minister of the Hamas-led government which Abbas sacked after Hamas routed his Fatah faction in a brief civil war in June, called the Jericho meeting a public relations gimmick that would yield nothing for the Palestinians.

Under heavy security, Olmert and Abbas met at a resort hotel in Jericho, less than a kilometre (half a mile) from the last Israeli checkpoint at the entrance to the West Bank city.

Principles
Israeli officials said the goal was to reach agreement on a set of common principles on borders, refugees and other key issues without filling in the most divisive details, such as which Jewish settlements would have to be uprooted.

If Olmert and Abbas agree on "principles", they will be presented to the conference expected to be held in November, Israeli and Western officials said.

Olmert and Abbas would then set up working groups to begin negotiating the details, according to Western officials.

Seeking Arab support to contain bloodshed in Iraq and counter Iran's nuclear programme, U.S. Secretary of State Condoleezza Rice is pushing for progress on the Palestinian front in President George W. Bush's last 17 months in office.

The last round of final-status talks broke down six years ago.  Israeli officials said the proposed agreement on principles would broadly call for Israel to withdraw from about 90 percent of Palestinian territory.