Prime Minister Ehud Olmert is considering acquiescing to Palestinian Authority Chairman Mahmoud Abbas' request that Israel free Palestinian prisoners ahead of the Eid al-Adha festival at the end of the week.

Abbas asked for the release during his meeting with the prime minister Saturday in Jerusalem.

The government will convene in the coming days to discuss the release as a gesture aimed at strengthening Abbas, regardless of any deal involving the release of captured Israel Defense Forces soldier Gilad Shalit.

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Olmert hinted that he would agree to the prisoner release, saying the time had come to show "flexibility and generosity."

The prime minister has thus far maintained it would not release any Palestinians before the release of Shalit, who has been held by a number of militant groups for roughly six months.

Olmert asked cabinet ministers for their position on the prisoner release during the weekly cabinet meeting on Sunday. The prime minister did not voice has yet to decide on the matter, according to Israel Radio.

Three cabinet minister said in response that the release of prisoners before Shalit is freed should be considered as a goodwill gesture that would boost Abbas' position on the Palestinian street, according to the radio.

Vice Premier Shimon Peres said he sees no reason why a gesture should not be made to Abbas in order to support the moderates in the PA.

Defense Minister Amir Peretz said there is room for such a move before Shalit's release.

Transportation Minister and former defense minister Shaul Mofaz said the proposal should be considered. Israel has made such gestures in the past and that the PA chairman should be supported, Mofaz was quoted by the radio as saying.

"There are among the Palestinians responsible and moderate sources who openly say they want to make peace with Israel," Olmert told a Kadima party meeting late Sunday. "Abu Mazen is an opponent. He is not an easy opponent, but with an opponent like this, there might be a chance for talks to reach an agreement."

Shalit's father, Noam, said in a TV interview that he would support an early prisoner release if it can bring his son home. "I support this move, as long as it is reasonable and if it helps set my son free," he said.

Peretz said earlier Sunday that it wasn't clear whether Israel's policy of restraint in the face of continuing Qassam rocket fire is actually strengthening the moderates in the Palestinian Authority, as is one of the goals of this policy.

Peretz added that the real question is whether the talks between Olmert and Abbas would bring about the release of Shalit.

Eitan: Israel should consider freeing Barghouti in Shalit deal
Pensioners' Affairs Minister Rafi Eitan said Sunday that Israel should consider freeing jailed Palestinian militant leader Marwan Barghouti in a prisoner exchange for captured Israel Defense Forces soldier Gilad Shalit.

Asked by Israel Radio if Israel would free Barghouthi as part of a deal to secure Shalit's release, Eitan replied: "If someone puts a request to release him from prison on the agenda, it should be discussed in accordance with the law."

Pressed as to whether that meant a release was possible, he said: "It's a question of what you would get in return."

This is the second time in less than a month that a minister has suggested Israel consider freeing Barghouti, who is currently serving five life sentences due to a conviction on several counts of murder for ordering terror attacks against Israeli civilians.

Environment Minister Gideon Ezra made similar comments to Israel Radio earlier this month. "If the Palestinian Authority prevents arms smuggling in the Philadelphi Route [from Egypt to Gaza], then I am in favor," said Ezra. "If the Palestinian Authority promises to crush terrorism, as it undertook to do, then I am in favor."

Olmert: Further meetings with Abbas to come
Olmert told his cabinet Sunday that he plans to hold several future meetings with Abbas, in light of the progress made at the summit between the two Saturday.

He told ministers that "it was a good meeting."

Olmert said that he had wanted to meet with Abbas since the first day of his term as prime minister, but his plans were continually delayed due to internal problems and other issues.

Also Sunday, Olmert briefed Egyptian President Hosni Mubarak on his meeting with Abbas, describing it as a very good meeting that could pave the way to a better future.

During the two-hour Saturday night summit at the prime minister's residence in Jerusalem, Olmert agreed to a series of concessions to help bolster the PA chairman, including the transfer of $100 million in frozen taxes collected on behalf of the PA. The funds will be transferred directly to Abbas, and not to the Hamas-led government.

In the cabinet briefing, Olmert said the transfer of the tax money would serve as humanitarian aid to the Palestinian people who "suffer due to the failing Hams-led government's desire to exclude itself from the international community."

The cabinet unanimously approved the trasfer of the $100 million to Abbas.

Vice-Premier Shimon Peres said Sunday that Saturday's meeting between the two leaders could provide an opening to a revival of Olmert's "convergence" plan for futher withdrawals in the West Bank.

Asked if the convergence plan could be back on the negotiating table, not as a unilateral measure but as a potential element in a future peace accord, Peres told Israel Radio:

"An opportunity has been created, certainly. I don't want to say that it's a done deal. It doesn't exist. But this is an important opening, one that should not be dismissed."

Chief Palestinian Liberation Organization negotiator Saeb Erekat confirmed during a press conference Saturday evening in Ramallah that Israel has agreed transfer the funds for humanitarian purposes. Erekat said the two sides also agreed that NIS 35 million would be transferred to hospitals in East Jerusalem.

The meeting is a "first step toward rebuilding mutual trust and fruitful cooperation," Olmert's office said in a statement. More meetings are planned, said Erekat.

Speaking at a news conference, Erekat said the leaders had also committed themselves to reviving a meaningful peace process.

Peres said Sunday that Hamas' influence was waning, despite recent financial aid from Iran. "Hamas is weakening," he said. "The Iranians are not distinguished by over-generosity."

"The situation in Gaza is horrible, terrible. They fire, they destroy, without any logic," Peres said, referring to Qassam attacks. "They are shooting themselves in the foot."

PM also agrees to remove checkpoints
The funds transfer will not occur immediately, but rather will be dependent on the establishment of a mechanism to ensure the money is used for the purposes intended by Abbas, and does not end up in the hands of the ruling Islamic militant group Hamas, currently in a violent power struggle with the PA chairman's Fatah movement.

Olmert also agreed to remove several West Bank checkpoints, and reexamine security procedures at the Karni commercial crossing between Israel and the Gaza Strip, in order to facilitate to movement of goods into Gaza.

In addition, Olmert promised to meet a quota of 400 trucks moving through the main cargo crossing between Gaza and Israel.

The two leaders failed to reach agreement on a key issue - a prisoner swap involving abducted Israel Defense Forces soldier Gilad Shalit - but decided to set up a committee to study it further. Olmert emphasized during the meeting that no Palestinian prisoners held in Israeli jails will be freed prior to the release of Shalit, held since June 25.

Olmert also warned that if Qassam rocket fire continued, Israel would be forced to abandon its current policy of relative military restraint.

According to Erekat, Abbas asked Olmert to release members of the Palestinian Legislative Council from Hamas arrested by Israel, as well as renew a past agreement not to pursue wanted militants.

Israel has also agreed in principle to allow Egypt to provide Abbas' security forces with weapons as well as allow the PLO's Badr Brigade to enter the territories. The brigade is currently stationed in Jordan.

Olmert also warned Abbas that given the continued Qassam rocket fire from Gaza despite a cease-fire in the area, it will be difficult for Israel to maintain its policy of restraint. Responding to a request by the Palestinian delegation to extend the cease-fire to the West Bank, Olmert said the Palestinians must first demonstrate an ability to uphold the truce in Gaza.

Abbas and Olmert met informally on the sidelines of a conference in Jordan earlier this year, but the PA chairman's last formal meeting with an Israeli prime minister was in February 2005, when Ariel Sharon held the post.

Olmert emerged from his official residence in Jerusalem to greet Abbas. The two shook hands and also kissed each other on the cheek. Abbas was then introduced to Olmert's wife Aliza, an artist known for her dovish views.

The two leaders took seats opposite one another at a long table, set for a meal and covered by white cloth. Israeli and Palestinian flags served as table decorations.

Palestinian sources told Haaretz that "the president [Abbas] did not receive dramatic concessions, although the release of prisoners could have helped greatly. Nevertheless, the meeting was held in a very positive atmosphere and the Israeli team showed willingness to discuss the various issues that could move the process ahead in the future. We heard many promises from Olmert, we hope at least some will be fulfilled."

The meeting comes a month after Olmert said in a speech at a memorial ceremony for David Ben-Gurion last month that he would "invite Abu Mazen [Abbas] to meet with me immediately, in order to conduct a real, open, genuine and serious dialogue between us."