Wearing smiles, shaking hands and kissing each other on the cheek, Olmert and Abbas began the first official talks held between Israel and the PA in more than two years. The meeting, which was announced only a few hours before the two men sat down, focused in large part on the issue of money.

Israel is currently holding some $500 million as part of the freeze on funds it collects on behalf of the PA that began after the Hamas terror organization took control of the government. Olmert agreed to release $100 million for humanitarian purposes, a sum Abbas hoped to use to pay government employees who have not received their full salaries since March.

The Almagor group, which represents victims of Arab terror attacks, announced that it will present a petition to the High Court on Sunday against plans by Olmert to transfer the tax funds to the PA.

Almagor head Meir Indor said, “Olmert has no way to ensure that the money will not reach Hamas. The hands are Abbas’s but the body belongs to Hamas. This decision hurts Israel’s public campaign against Hamas among other countries.”

Despite an assertion by Saeb Erekat, chief negotiator and top aide to Abbas, that Olmert would transfer the money directly to Abbas, Olmert spokesperson Miri Eisen was noncommittal as to whom it would be transferred, and how quickly that might happen.

"The money itself will not be transferred to the Hamas-led government, and right now we are looking for the right way to be able to transfer the money... for different humanitarian issues," she said.

Erekat said, as he emerged from the meeting, that Olmert agreed to eliminate several military roadblocks in Judea and Samaria within the next two or three days, in accordance with a list submitted to Israel by the PA. Erekat said an agreement was also reached on increasing the number of work permits for PA Arabs in Israel.

The two men met at the Prime Minister’s Residence in Jerusalem for the first time since each was elected in the Israeli and PA elections. The talks, which lasted two hours, concluded at 9:30 p.m. Israeli and PA flags flew side-by-side.

One issue that was apparently not resolved was the release of IDF soldier Gilad Shalit, who has been held by Hamas terrorists for six months.

Sources said that Olmert refused to agree to release some 1,400 terrorists demanded by the Hamas, Fatah, and Islamic Jihad terror groups, insisting that Shalit be freed first. "At the moment there is no talk of release of prisoners until Shalit is released," said Eisen.

The terror groups are also demanding the release of convicted murderer Marwan Barghouti, who is serving several life terms in an Israeli prison for his role in the murder of more than 30 Israeli Jews.

PA sources said prior to the meeting that the agenda was to have also included ways to strengthen and possibly expand the partial ceasefire between Israel and the PA that officially went into effect a month ago. Palestinian terrorists have fired more than 50 Kassam rockets since then.