Olmert says ready to free Palestinian prisoners

SDE BOKER, Israel, Nov 27 (Reuters) Israel will be prepared to release many Palestinian prisoners, including long-serving inmates, in return for a soldier militants seized last June, Israeli Prime Minister Ehud Olmert said today.

In a major policy speech, Olmert said he was reaching out to the Palestinians for peace -- offering a series of humanitarian and economic incentives if violence against Israel ceased.

He conditioned any resumption of peace talks on the soldier's release and acceptance by any future Palestinian unity government of a international demands to renounce violence, recognise Israel and accept existing interim peace accords.

''With Gilad Shalit's release and his return safe and sound to his family, the Israeli government will be willing to release many Palestinian prisioners, even those who have been sentenced to lengthy terms,'' Olmert said.

It was the first time that Olmert had specially spoken of exchanging prisoners for Shalit, whose capture in a cross-border raid by Palestinian militants triggered a five month old Israeli offensive into the Gaza Strip.

Olmert was speaking a day after a truce took hold in Gaza, designed to both halt the offensive and end rocket fire into Israel by Palestinian militants.

The ceasefire is seen as a step to reviving peace talks that collapsed in 2000 before the start of a Palestinian uprising.

Peace hopes have sunk further since the Islamic militant group Hamas came to power in March. It is engaged in so far unsuccessul talks with moderate President Mahmoud Abbas on forming a new coalition Palestinians hope can lead to an easing of Western sanctions.

Olmert said he would meet Abbas for a ''serious dialogue'' once such a government, that accepted Western terms, was in place and Shalit was released.

Olmert said that if Palestinian violence against Israel stopped, the government would be ready to ease travel restrictions and free up funds that were frozen when Hamas took office.

Doubts over how long the Gaza truce might last deepened on Monday when Israeli troops killed a militant commander and a 50-year-old woman during an exchange of fire in the occupied West Bank. The ceasefire does not extend to the West Bank.

REUTERS PB HS1727