Olmert, in dramatic policy shift, urges Palestinians to return to negotiations

JERUSALEM -- Israeli Prime Minister Ehud Olmert reached out to the Palestinians on Monday in one of his most conciliatory speeches yet, saying he was prepared to grant them a state, release desperately needed funds and free prisoners if they choose the path of peace.\nOlmert's remarks sealed a dramatic policy shift and built on a day-old truce meant to end five months of violence in the Gaza Strip, but new rocket attacks by Palestinian militants threatened the latest rapprochement.\n"I hold out my hand in peace to our Palestinian neighbors in the hope that it won't be returned empty," Olmert said.\n"We cannot change the past and we will not be able to bring back the victims on both sides of the borders," he said. "All that we can do today is stop additional tragedies."\nOlmert appealed to the Palestinians to form a new, moderate Cabinet committed to carrying out a U.S.-backed peace plan and securing the release of a captured Israeli soldier.\nOnce such a government was established, Olmert said, he would call for an immediate meeting with the moderate Palestinian president, Mahmoud Abbas, "to have a real, open, honest, serious dialogue between us."\nPalestinian legislator Saeb Erekat, a top Abbas aide, said the Palestinians were ready to negotiate a final peace deal.\n"I believe Mr. Olmert knows he has a partner, and that is President Abbas. He knows that to achieve peace and security for all, we need to shoot for the end game," Erekat said.\nBut the Palestinian Cabinet, led by Hamas militants who reject Israel's right to exist, accused Olmert of posturing.\n"This is a conspiracy. This is a new maneuver. Olmert is speaking about the Palestinian state without giving details about the borders," said Ghazi Hamad, a government spokesman.\nOlmert's speech raised the diplomatic stakes ahead of President Bush's scheduled trip to neighboring Jordan this week for talks with Iraqi leaders.\nErekat said it was possible Abbas would meet with Bush there, but Israeli officials denied that Abbas and Olmert might meet on the sidelines of the Bush visit.\nOlmert was elected in March promising to set Israel's final borders with the Palestinians by uprooting isolated communities dotted all over the West Bank while holding on to major settlement blocs. Israel, Olmert said, would act unilaterally without a Palestinian peace partner -- something it appeared inclined to conclude because of Hamas' violently anti-Israel ideology.\nBut a summer war with Lebanese guerrillas, which many Israelis blamed on their unilateral pullout from southern Lebanon six years ago, left Israelis cool to ceding more territory, and Olmert shelved that plan.\nHis speech Monday signaled a final break with that program -- and an attempt to entice the Palestinians back to the negotiating table by outlining likely Israeli concessions under a future peace deal.\n"We, the state of Israel, will agree to the evacuation of many territories and the settlements that we built there. This is extremely difficult for us, like the splitting of the Red Sea. We will do it for real peace," he said.\nIsrael would pull out of West Bank land and uproot settlements under a peace deal, Olmert said.\nIn return for a serious Palestinian push for peace, he said, Israel would be prepared to reduce checkpoints that have severely restricted movement in the West Bank, release hundreds of millions of dollars in funds frozen after Hamas took power in March and free some of the thousands of Palestinian prisoners Israel holds if Hamas-linked militants release -- alive and healthy -- an Israeli soldier they captured in June.\nThe freezing of funds has created great hardship in the Palestinian territories by rendering the Hamas government unable to pay full salaries to its civil servants, who provide for one-third of the Palestinian people.\nA significant prisoner release would be a major confidence-building gesture because prisoners hold great weight in Palestinian society.\nIsraeli government officials said they had not ruled out releasing Palestinian uprising leader Marwan Barghouti, who is serving five life sentences for masterminding deadly attacks.\nIn exchange for Israeli concessions, Olmert said, Palestinians would have to renounce violence, recognize Israel's right to live in peace and security and give up their demands to allow refugees from the 1948 Mideast War to return to their homes in what is now Israel.\n"The uncompromising extremism of your terror organizations ... hasn't brought you closer to achieving the goal that I'm convinced many of you share -- to establish a Palestinian state," he said.\nHamad, the Palestinian government spokesman, said Palestinians would not abandon the fight for refugees.\n"It is a main part of the Palestinian cause," he said.\nOlmert's offer to revive stalled peace talks came a day after the two sides began observing a cease-fire in Gaza, raising hopes new peace efforts would follow.\nPalestinian militants violated the cease-fire by launching two rockets at Israel on Monday. No one was injured, but Israel has threatened to strike back if rocket attacks increase.\nErekat said he was working with the Israelis to expand the cease-fire to the West Bank and hoped to have an agreement within days. Israeli officials said they would wait to see what happens in Gaza first.\n"If the cease-fire in Gaza works, I hope it will be possible to transfer that more positive reality to the West Bank as well," Foreign Ministry spokesman Mark Regev said.