Amid mounting pressures from US, Israeli Prime Minister Benjamin Netanyahu is 'amenable' to an interim agreement in the West Bank, including the establishment of a Palestinian state within temporary borders. But he has rejected demands to freeze settlement activities in east Jerusalem, a media report in Jerusalem said.
Netanyahu considers such an interim step a possible way to unfreeze the stalled political process with the Palestinians who are demanding a complete halt on constructions in the West Bank and east Jerusalem for the peace talks to resume, daily 'Ha'aretz' reported.
He has however refused to agree to a freeze on Jewish constructions in east Jerusalem, an issue which has led to a diplomatic row with ally US, described as the worst crisis between the strategic partners in the last 35 years.
Netanyahu and his aides are said to have held intensive talks in recent days with representatives of the US administration in an effort to contain the crisis in the relations between the two countries.
The Israeli premier is scheduled to meet US Middle East special envoy George Mitchell on Friday, who will announce the start of indirect "proximity" talks between Israel and the Palestinians during his current three-day visit to Israel.
There have been signals from the White House in recent days of a willingness to see an improvement in relations with Netanyahu.
The signals included appeasing messages highlighting US commitment to Israel's security, and peaked with President Barack Obama's Independence Day greeting.
Senior aides to the US President, including his chief of staff Rahm Emanuel and National Security Adviser, General James Jones, also publicly expressed their support for the strong ties between the two countries.
The formula of a Palestinian state within temporary borders was included in the second stage of the road map of 2003, but the Palestinian Authority (PA) headed by Mahmoud Abbas opposed it then and maintains the same position.
Three Israeli politicians, Defence Minister Ehud Barak, President Shimon Peres and lawmaker Shaul Mofaz, have also tried to advance the idea of a Palestinian state within temporary borders during the past year, as a reasonable recipe for breaking out of the current political stalemate that was created since elections in Israel.
If there is a breakthrough in the initiative it is likely to meet with resistance from Netanyahu's overwhelmingly right-wing dominated coalition partners who oppose any concession to the Palestinians.
The Israeli premier himself yesterday told Channel 2 that "there will be no freeze in Jerusalem" and that "the peace process depends on one thing - removing preconditions to negotiations."
He even warned that if Israel withdraws from Arab neighbourhoods in Jerusalem, "Iran will be able to enter there," as it did in Lebanon and the Gaza Strip.
The Israeli leader re-iterated that in his talks with Obama he will say that "there are things I am not willing and do not do."