Olmert says understandings reached in peace talks

By Adam Entous and Ari Rabinovitch

JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert said on Tuesday that he and Palestinian President Mahmoud Abbas had reached "understandings and points of agreement" on some key issues in U.S.-backed peace talks.

Palestinian officials reacted with some skepticism about the extent of progress. But on the eve of a visit from U.S. President George W. Bush that comes amid a police investigation into Olmert's finances, the prime minister is keen to emphasize the positive in efforts to make peace with the Palestinians.

"Our talks with the Palestinian Authority are serious and significant," Olmert said in a speech to foreign dignitaries and business leaders attending a conference being held as part of celebrations of the 60th anniversary of Israel's statehood.

"There has been significant progress, and understandings and points of agreement have been reached in important matters, but not on all the issues," Olmert added.

He did not elaborate on the points of agreement but said: "The biggest and most important challenge before the state of Israel, which will determine its future, is the challenge of determining permanent borders."

Bush, who begins a three-day visit to Israel on Wednesday, helped relaunch negotiations in November and has said he hopes they can end 60 years of Israeli-Palestinian conflict by producing a deal on creating a Palestinian state before he leaves office in January. Many think that deadline unrealistic.

Palestinian negotiator Saeb Erekat, responding to Olmert's remarks, said: "Our negotiations have been serious and in depth, but gaps still exist in all issues. We hope to bridge the gaps."

Another senior Palestinian official, speaking on condition of anonymity, told Reuters: "I don't know what kind of progress he's talking about. We still have a long way to go."