Olmert says peace talks will tackle Jerusalem later

JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert, keen to shore up his fractious coalition, suggested on Monday that the divisive issue of Jerusalem would not be tackled early in U.S.-backed peace talks with the Palestinians.

Olmert, who could face new calls to resign this week when an inquiry into the 2006 Lebanon war issues a final report, launched peace talks with Palestinian President Mahmoud Abbas in November. Negotiating teams have met twice so far.

A spokesman for Olmert's Kadima party quoted the prime minister as saying negotiators would tackle less sensitive subjects before discussing the fate of Jerusalem -- revered as holy by both Jews and Muslims.

"The negotiations with the Palestinians will deal with all issues. That doesn't mean that it will deal with all issues at once and with the same intensity," Kadima spokesman Shmuel Dahan quoted Olmert as saying after the party's weekly meeting.

"The issue of Jerusalem is very sensitive and in this regard it is preferable to begin with issues that have a chance of achieving understanding rather than starting with issues where the disagreements initially are large."

Israel and the Palestinians have pledged to tackle "core issues" such as borders, the fate of Palestinian refugees and the future of Jerusalem with a goal of reaching a deal before U.S. President George W. Bush leaves office in early 2009.

Sceptics say that timetable is too ambitious, given that Olmert's right-wing coalition partners oppose ceding land to the Palestinians and Hamas Islamists hostile to Abbas and Israel control the Gaza Strip.

The future of Jerusalem, which Israel regards as its "complete and united capital", is one of the most divisive issues facing negotiators.

Abbas wants Arab East Jerusalem, captured by Israel in the 1967 Middle East war and annexed in a move not recognised internationally, as capital of the state he wants to establish in the occupied West Bank and Gaza.