Olmert says full Israel-Palestinian deal not in reach

By Adam Entous

JERUSALEM (Reuters) - Prime Minister Ehud Olmert told parliament on Monday a full Israeli-Palestinian peace accord that includes Jerusalem was not within reach this year but said differences over borders and refugees were bridgeable.

U.S. President George W. Bush had urged both sides to sign a "peace treaty" before he leaves office in January, without offering details about what that deal should entail.

But Olmert, in remarks released by parliament after a closed-door hearing, said Jerusalem was too contentious an issue to be resolved this year and that Israel and the Palestinians should instead agree on a "mechanism" to tackle it in 2009.

Palestinian negotiator Saeb Erekat said Olmert's comments showed "Israel's determination to destroy the negotiations and the peace process".

Olmert, who this month said Israel and the Palestinians had never been so close to an agreement, has been talking up peace prospects as he clings to office in the face of a police investigation that could force him to step down.

Officials said Olmert envisaged agreeing a joint document this year with Palestinian President Mahmoud Abbas that sets out borders for a future Palestinian state, security arrangements and a way to deal with millions of Palestinian refugees. But the thorny issue of Jerusalem would be left out, they said.

"I do not see a viable possibility of reaching understandings on the issue of Jerusalem in the stated timeframe," Olmert was quoted by an official as saying.

"On the other three issues, I estimate that it would be possible to reach understandings by the end of the year, including the refugee issue," Olmert said, describing the gaps on borders, refugees and security as "not insurmountable".