Israel Willing to Negotiate With Abbas to Shore Up New Palestinian Government

Israel is willing to start talks on creating a Palestinian state if the new government of President Mahmoud Abbas demonstrates it is a "credible and serious administration" committed to defeating terrorism, Israel's prime minister said yesterday.

Speaking at the White House before talks with George Bush, Ehud Olmert said the schism after Hamas's armed takeover of the Gaza Strip presented an "opportunity" to empower Palestinian moderates.

"I am going to make every possible effort to cooperate with him [Mr Abbas] ... There is no question that I want to talk to him," Mr Olmert said.

The objective remained the two-state solution proposed by Mr Bush five years ago, he added. Having exorcised Hamas "terrorists", Mr Olmert said the new government must show it could "upgrade the quality of life in the West Bank, improve security, and fight terror in the most effective way".

Mr Bush said the US fully supported Mr Abbas and the new prime minister, Salam Fayyad, and was "open to the idea" of peace talks.Attempting to underscore Hamas's isolation, he said Mr Abbas was "president of all the Palestinians" and Mr Fayyad was a "good fellow".

Mr Fayyad's government also won warm praise from one of Gordon Brown's closest aides a week before the chancellor - said to see the Middle East as a "high priority" - takes over from Tony Blair.

Ed Balls, economic secretary to the Treasury, made clear that the UK would also seek progress in the West Bank.

"What's happening in Gaza is terrible but this is a moment of opportunity in the West Bank," he told the Royal Institute for International Affairs in London. "The shocking violence we saw in Gaza highlights the need to address its root causes." Mr Balls, co-author of a G8 study on how to rebuild the economy of the region, is tipped for a senior ministerial post when Mr Brown becomes prime minister next week.

In Washington, neither Mr Bush nor Mr Olmert mentioned how Israel and western countries proposed to handle a Hamas-led Gaza. The Islamist movement does not recognize Mr Abbas's new government and could disrupt any new arrangements.

Mr Olmert said Israel would not be "indifferent" to the plight of Palestinians trying to leave Gaza for the West Bank, but nor did he offer free passage, saying instead that "we will check every case".

The Israeli prime minister also said yesterday that in the coming week he would introduce a proposal to unlock millions in frozen tax revenue that Israel collects on behalf of the Palestinians, in the first concrete steps to bolster Mr Abbas's government. He did not disclose the amount of money Israel would free up, but said it was a part of a serious of gestures to assist Mr Abbas in his struggle with Hamas.

Speaking to Israeli reporters travelling with the prime minister, Mr Olmert said he would also consider releasing Palestinian prisoners and shoring up Mr Abbas's military forces. "We have an opportunity to seize the situation and work toward the establishment of a Palestinian state and fulfil the president's vision of two states for two people," Mr Olmert said. "We need to strengthen the security forces [of Mr Abbas] and our cooperation with them."

On Monday, the state department announced that $40m (£20m) in US humanitarian aid, mostly earmarked for Gaza, would be distributed by a UN agency.