Prime Minister Ehud Olmert declared Monday that Israel will work toward the establishment of a PalestinianAuthorityState. The statement was made after a 90 minute meeting with PA Chairman Mahmoud Abbas’s at the InterContinental Hotel in Jericho.

It was the first time an Israeli head of state attended a meeting in a PA-controlled city, and a move toward final status talks that Olmert vowed to avoid, prior to his meeting with Abbas.

The two men agreed to meet regularly to prepare for a Middle Eastern summit organized by the United States, scheduled for this autumn. They also agreed to speed up progress in their talks.

“We decided to increase contacts to advance understandings and reach a working model that will allow progress towards establishing a Palestinian state,” announced Olmert after the meeting.

“The aim is to achieve U.S. President George Bush’s vision of two countries for two peoples, living in security and peace side by side,” said the prime minister.

Israeli government officials added the caveat, however, that an agreement would be dependent upon the ability of the Abbas government to maintain stability and peace within the PA territories.

“Right now, neither side is ready for a land transfer,” cautioned a government source quoted by Ynet. “The more we advance, we will be able to transfer land to Palestinian control, but that depends on the [PA population’s] ability to stand on two feet.”

According to media reports, the prime minister is considering a plan masterminded by President Shimon Peres that would hand over land that would equal 100 percent of the areas liberated by Israel in the 1967 Six Day War.

Peres presented the plan to Olmert almost immediately after taking office in July, according to a report by Haaretz. The Prime Minister's Office later denied the report.

Abbas demanded that Israel halt development of new communities in Judea and Samaria as well as expansion of existing communities. He also insisted on establishment of joint Israeli-PA staffs on all the issues at hand.

Moreover, he repeated his demand that Israel release more PA terrorists, including the return from exile of those terrorists who were captured after barricading themselves in the Church of Nativity in Bethlehem. After spending time in a prison in PA-controlled Jericho the terrorists, who were convicted of various murders of Israeli soldiers and civilians, were transferred to Jordan.

PA chief negotiator Saeb Erekat, who also attended the meeting, told reporters, “We made clear that we want a permanent solution based on the international decisions. We focused on the issues that will bring about the establishment of a Palestinian state,” he said.

Erekat also expressed PA impatience with the ongoing efforts by U.S. Secretary of State Condoleezza Rice to shepherd the talks through the stormy waters surrounding the issue of terrorism and other security matters.

“We don’t need Condoleeza Rice’s intervention, but rather decisions by the leadership of both sides to end the occupation,” said Erekat.