Olmert deputies to meet Abbas before Bush summit

JERUSALEM, May 19 (Reuters) Israeli Prime Minister Ehud Olmert's top two deputies will hold talks with Palestinian President Mahmoud Abbas on Sunday in the highest-level contact since Hamas swept to power in January, officials said.

The meeting, on the sidelines of the World Economic Forum in Egypt, will precede Olmert's first trip to the United States, where he hopes to win President George W. Bush's support for setting Israel's border in parts of the West Bank.

The office of Foreign Minister Tzipi Livni said today she and Vice Premier Shimon Peres would hold a 30-minute meeting with Abbas and senior aide Saeb Erekat at 0800 GMT.

Erekat said the talks would centre on ideas for reviving moribund peace negotiations and freeing up Palestinian tax levies frozen by Israel after Hamas, an Islamic group opposed to coexistence with Israel, won a January election.

''We will discuss ways of resuming the peace process,'' Erekat told Reuters. ''We will also focus on the seizure of our money.

It's our money and they should release it as soon as possible.'' But Israeli diplomatic sources said Peres and Livni would limit the discussion to the Palestinian fiscal crisis, which has deepened with recent US-led sanctions on the Hamas government.

''We want to do whatever we can to facilitate working solutions for the humanitarian problem,'' an Israeli source said.

Olmert has credited Abbas for pursuing a two-state solution to the Israeli-Palestinian conflict, but rules out peace talks unless Hamas renounces violence and recognises the Jewish state.

Arguing the absence of a Palestinian negotiating partner, Olmert wants to withdraw selectively from the occupied West Bank, abandoning some Jewish settlements and effectively annexing others in blocs behind a new, fortified Israeli border.

Palestinians say Olmert's ''convergence plan'' will deny them viable statehood and further boost Hamas and other militant groups that have spearheaded a more than 5-year-old revolt.

Olmert, who leaves for the United States on Sunday, has sought to play down the finality and unilateralism of his plan.

In a New York Times interview yesterday, he denounced the Palestinian leadership as ''extremist'' and ''unyielding'', but added: ''I don't believe that at any time in the future we will change things without talking to the Palestinians, without coordinating with the Palestinians, without checking with the Palestinians.'' In the interview, Olmert said there was no humanitarian crisis in the Palestinian Authority and called it ''for the time being total propaganda''.

But he said Israel was willing to help relieve the pressure on the Palestinians by releasing some of the 220 million dollars in frozen taxes to pay for medical services in the West Bank and Gaza.

Peres said that at Sunday's talks with Abbas he would press his favourite peace formula of enhanced economic cooperation between Israel and the Palestinians.

''I do not want to touch on the diplomatic dispute over borders,'' Peres told Israel's Army Radio. ''But there is no reason, even without an agreed border, that there should not be consensual economic activities like there is in Europe.'' REUTERS SHB RN1612