By David Brunnstrom

TAMPERE, Finland, Nov 27 (Reuters) The European Union hailed signs of hope for West Asia peace today after a ceasefire took hold in Gaza and Israel said it was prepared to free many jailed Palestinians in return for a captured soldier.

''For the first time for a long period we do see some very concrete rays of hope,'' Finnish Foreign Minister Erkki Tuomioja said in the Finnish town of Tampere, where Spain was due to outline a Middle East peace initiative at a dinner with Arab and Israeli ministers on Monday night.

EU foreign policy chief Javier Solana said he had discussed the Gaza ceasefire with Israeli Foreign Minister Tzipi Livni in Tampere and it appeared to be holding.

''If that is the case, then I think we are in a new good moment,'' he told Reuters. ''Let's hope we can get as much as possible from the ceasefire, then the release of prisoners, then a meeting of Olmert and (Palestinian President Mahmoud) Abbas.'' ''If the ceasefire is maintained ... that is a very important achievement and I hope it will make possible to open a new page, and talks between the two sides will take place and Abu Mazen (Abbas) will manage to get a new government.'' Livni told a news conference she hoped a similar ceasefire could be agreed in the West Bank. ''And I do hope that is only one step out of many, in order to promote something in the Middle East which can be more than a ceasefire.'' A ceasefire took effect in Gaza early yesterday, and Prime Minister Ehud Olmert said in a major policy speech today that Israel was ready to free many jailed Palestinians if a captured Israeli soldier was released.

He also said Israel was willing to evacuate some of its West Bank settlements in order to bring about a real peace.

Tuomioja said it was encouraging that there were signs that all parties, including Hamas, were ready for a Palestinian government that would respect conditions set out by the international community.

He said this could mean an end to sanctions imposed on the Palestinian Authority because of Hamas's refusal when it came to power in March to recognise Israel and renounce violence.

''That would mean political engagement, economic engagement, humanitarian engagement and ending the isolation of the Palestinian Authority,'' he said.

Palestinians' living conditions must be improved immediately and they need a credible vision of a better future, he said. ''No ceasefire will hold for ever unless there is also progress on the political front.'' REUTERS LL HT2130