In a symbolic move, Prime Minister Ehud Olmert became the first Israeli leader to visit a Palestinian town since the outbreak of fighting seven years ago.

Olmert arrived Monday amid heavy guard to meet with Palestinian President Mahmoud Abbas in the biblical town of Jericho. The two discussed the creation of a Palestinian state.

"This will lead us soon into negotiations about the creation of a Palestinian state," Olmert said.

Those discussions were carried out in an atmosphere of pessimism.

"They can't deliver anything. It's impossible," Palestinian Ayed Abu Akkar told Â鶹´«Ã½. He is unemployed, with his home offering a view of the security wall between Israel and the West Bank.

Abu Akkar said the two sides can't agree to open a gate or a grant a permit, let alone decide the bigger issues of the Palestinian-Israeli conflict.

Accompanied by two helicopters, Olmert arrived by motorcade and at a five-star hotel near a permanent Israeli army checkpoint on the outskirts of Jericho.

The three-hour meeting was held in one of the West Bank's most peaceful areas, but it still held potential for danger as the West Bank cities are controlled by Abbas' weak police forces.

The meeting also tested renewed Israeli-Palestinian security co-ordination in the West Bank, following the fall of Gaza to Hamas. The Israeli army sealed checkpoints around Jericho, while Palestinian police blocked roads around the hotel.

The Abbas-Olmert meeting is one in a series of sessions meant to prepare for an international Mideast conference in the United States in November.

The sides appear to have conflicting expectations.

The Palestinians wanted the two leaders to sketch the outlines of a final peace deal, to be presented to the U.S. conference, said Palestinian negotiator Saeb Erekat.

The four core issues of a future peace deal are:

  • The final borders of a Palestinian state;
  • A division of Jerusalem;
  • A removal of Israeli settlements; and
  • The fate of Palestinian refugees.

"What they need to do is to establish the parameters for solving all these issues," Erekat said. "Once the parameters are established, then it can be deferred to experts" for drafting.

But an official in Olmert's office said the core issues were not be discussed. David Baker said the leaders discussed:

  • Humanitarian aid to the Palestinians;
  • Israeli security concerns; and
  • The institutions of a future Palestinian state.

Both sides said the meeting dealt with easing daily life in the West Bank, including the removal of some of the checkpoints erected after the outbreak of the second Palestinian uprising in September 2000.

The two leaders previously agreed to try to restore the situation to what it was before the uprising, including returning full Palestinian control over West Bank towns and cities.

The Israeli military, however, has been slow to dismantle roadblocks and ease control over Palestinian towns, saying Abbas' forces are not strong enough to prevent attacks on Israelis.

The last meeting between Israeli and Palestinian leaders on Palestinian soil was in 2000, when then-Israeli Prime Minister Ehud Barak held talks with Abbas' predecessor, the late Yasser Arafat. The discussions took place in the West Bank town of Ramallah.

The Abbas-Olmert meeting is part of a recent flurry of peace efforts sparked by Hamas' takeover of Gaza in June, after a five-day rout of Abbas' Fatah movement.

The Hamas victory led Abbas to form a moderate government in the West Bank, which has received broad international backing, Hamas, however, remains largely isolated in Gaza.

Israel's efforts in assisting Abbas include:

  • Releasing 250 Palestinian prisoners;
  • Resuming the transfer of Palestinian tax money; and
  • Granting amnesty to Fatah gunmen willing to put down their weapons.

The efforts have also been helped by the visit of new international Mideast peace envoy Tony Blair, an unprecedented visit by an Arab League delegation to present an Arab peace plan to Israel, and the U.S. plans for a regional conference.

In Gaza, Hamas spokesman Sami Abu Zuhri criticized Abbas for meeting Olmert, saying the meeting was "aimed at beautifying the ugly image of the Israeli occupation before the world."

"All meetings will be of no benefit to the Palestinian people," Abu Zuhri said.

Some analysts say if Gaza is left out of the equation, Abbas can't guarantee security for Israel.

With a report from CTV's Janis Mackey Frayer and files from The Associated Press