Defense Minister Amir Peretz called on the government Sunday to begin negotiations on a final settlement with Palestinian Authority Chairman Mahmoud Abbas, rather than waiting for the Palestinians to disarm their factions and dismantle the terrorist infrastructure, as required by the road map.

Peretz told ministers at the weekly cabinet meeting in Jerusalem that kicking off the process would return the political initiative to Israel's hands and would allow it to set an agenda ahead of the Arab League summit, which is set to take place in Riyadh, Saudi Arabia at the end of March.

"On the one hand, we must not concede to letting the Palestinians ignore the Quartet's conditions - they must fight terror - but on the other hand, Israel must begin a political initiative rather than being on the political defense," said Peretz. "The political freeze is working against it [the PA]. We must take the initiative into our own hands."

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Other ministers present at the meeting also called on Israel to begin implementing a political initiative.

Housing and Construction Minister Meir Sheetrit said that if he were in Prime Minister Ehud Olmert's place, he would ask to attend the Arab League summit in Riyadh.

"It's time Israel took the political initiative to advance the peace process," said Education Minister Yuli Tamir. "We need to implement a process in which we are leading, rather than being led."

Olmert's cabinet voted overwhelmingly Sunday to uphold the Israeli boycott of the new Hamas-Fatah Palestinian government, implemented in the wake of Hamas' victory in the January 2006 parliamentary elections.

In the vote, 19 ministers voted in favor of continuing the boycott. There were no votes against. There were two abstentions - Tamir and Culture, Science and Sport Minister Raleb Majadele, both of Labor.

Olmert meanwhile called on Western nations not to be deceived or budge in the face of a newly-formed Palestinian unity government.

His statement came as newly appointed Palestinian Foreign Minister Ziad Abu Amar called on Israel not to turn its back on an opportunity to work together with the unity government.

Speaking at the opening of the weekly cabinet meeting in Jerusalem, Olmert said that "Israel expects the international community not to be misled by the formation of the Palestinian unity government and to persist with its position, of isolating the government that rejects the principles set out by the Quartet."

Olmert said also that the new unity government encumbers Israel's ability to deliberate with Abbas, because it includes problematic elements that Israel cannot accept because they do not recognize its existence.

In an interview with Israel Radio, Abu Amar on Sunday called on Israel to work together with the Palestinian unity government, saying he fears Israel would miss out on the opportunity to establish cooperative ties because "[Israel] doesn't know what it wants."

Abu Amar emphasized that the Palestinians do not expect Israel to recognize their unity government. He said that they do, however, want Israel to abolish measures imposed since the Hamas election win, namely removing an economic boycott and releasing frozen tax monies.

When asked why the platform of the new government does not mention "recognition of Israel," Abu Amar said Israelis would be better off not insisting on semantics.

The Palestinian minister said also that his government would act for the prompt release of abducted Israel Defense Forces soldier Gilad Shalit as part of a deal for prisoner exchange.

Ahead of the cabinet meeting, other ministers voiced their responses to the new unity government. Foreign Minister Tzipi Livni said Israel would not budge from its insistence not to deliberate with the new government.

Cabinet minister Avigdor Lieberman said that Israel, having decided to shun the new Palestinian unity cabinet, should also cut all ties with Abbas, also known as Abu Mazen.

Israel has said it would boycott contacts with the new cabinet, but would maintain lines of communication with Abbas.

"It would be better that there be no contact with the new Palestinian government, including Abu Mazen, who in effect provides a cover for the new government," Lieberman told Army Radio.

But a member of the center-left Labor Party, the biggest coalition partner of Olmert's Kadima Party, suggested it was a mistake to shun non-Hamas ministers who have shown a commitment to a negotiated peace.

Majadele said Saturday that Israel must negotiate with the new Palestinian unity government, Army Radio reported.

According to Majadele, Israel must not boycott the moderate Fatah members appointed to the new government. "Half of the cabinet members are Oslo [Accords] people who have already signed agreements with Israel."

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