Israel wants to reach a peace deal with the Palestinians by the end of the year but postpone a final agreement on the future status of Jerusalem, a senior government official said yesterday. Both sides are interested in reaching a full agreement by the end of 2008 and believe it is possible", the

official said after the latest meeting between Israeli PM Ehud Olmert and Palestinian president Mahmud Abbas. But since the question of Jerusalem is not solvable within this timeframe they will have to agree to postpone an accord on this issue and agree on a mechanism and a timetable for Jerusalem", the official said. The remarks came amid mounting pressure to show progress in slow-moving US-backed peace talks as Olmert prepares to step down to battle a graft scandal following a September 17 party leadership election. Olmert's spokesman Mark Regev insisted Olmert's early departure from office "would not interfere with the discussions". There are media reports that Olmert is pushing for a "framework agreement" to present to US President George W. Bush and Secretary of State Condoleezza Rice next month in Washington. The talks were launched in November with the goal of reaching a comprehensive peace deal by the time Bush leaves office in January 2009, but the two sides remain sharply divided on the core issues of the conflict. These include not only the future status of Jerusalem, but final borders, the fate of some 4.6 million UN-registered Palestinian refugees, and the future of Jewish settlements on Israeli-occupied territory. Israel's Haaretz newspaper reported that Olmert has presented Abbas with a proposal that would lay out framework principles on core issues and create a five-year international mechanism for reaching an agreement on Jerusalem. Palestinians have demanded mostly Arab east Jerusalem-seized and annexed by Israel in the 1967 Six Day war in a move not recognised internationally-as the capital of their future state. Israel considers the entire city its "eternal, undivided" capital. According to Haaretz, Olmert's proposal would have Israelis and Palestinians negotiate a solution for Jerusalem with input from the US, the EU, the United Nations, Russia, and perhaps Egypt and Jordan. Officials close to Abbas neither confirmed nor denied the Haaretz report, but the Palestinians have always insisted they will not accept a partial agreement that does not resolve all the core issues. President Abbas and the Palestinian leadership are determined to arrive at a complete agreement including all the issues, but this depends on how serious the Israeli side is", NiHamad, an advisor to Abbas, told AFP. The Haaretz report was slammed by members of Olmert's government, including the deputy PM and head of the ultra-Orthodox Shas party. "This government has no public legitimacy, and certainly no legal legitimacy to sign any shelf accord or reach any understanding on Jerusalem", Eli Yishai said during Aug 31 weekly cabinet meeting. Yishai, a crucial coalition ally, has repeatedly threatened to pull out of Olmert's government if the subject of Jerusalem is raised in the talks. Foreign Minister Tzipi Livni, who heads Israel's negotiating team and attended the meeting, did not comment on the report but warned against a hasty agreement. Time consideration should not force us to make the grave mistakes of trying to bridge gaps in a way that will lead to a breakdown or give up critical issues for Israel only to reach some results", an aide quoted Livni as saying. Livni is a front-runner to succeed Olmert at the head of their centrist Kadima party and perhaps as PM, as is Transport Minister Shaul Mofaz, a hawkish former general.