A week before Prime Minister Benjamin Netanyahu is scheduled to depart for the Washington summit during which direct talks between Israel and the Palestinians will be inaugurated, Israeli ministers and MKs are engaging in intense debate over the possibility of continuing the 10-month settlement construction freeze, which expires in late September.

A senior minister who belongs to the forum of seven, an informal inner cabinet with which Netanyahu consults on important matters, said yesterday it is likely that the cabinet will ultimately adopt the compromise put forth by Dan Meridor. The deputy prime minister has proposed that Israel resume construction in settlement blocs and areas close to the separation fence come September, but extend the freeze in areas that are unlikely to remain under Israeli control after a peace deal is reached, such as isolated settlements.

A number of ministers said yesterday that the government is likely to adopt this idea and were confident that it would not undermine the coalition or lead to a crisis.

However, while some ministers have made it clear that they will oppose any deal that would undermine settlement construction, others expressed opinions that may serve as the basis of understandings with the Palestinians.

Shas is expected to strongly oppose any freeze in construction, but Yisrael Beiteinu, which is considered more right-wing, is expected to put forth more moderate views.

Ministers said yesterday that if the Yisrael Beiteinu chairman, Foreign Minister Avigdor Lieberman, sticks to his current policy and does not leave the coalition, Shas will also stay in the government.

Lieberman has presented his own compromise formula regarding the settlement freeze, which is scheduled to end September 26. He said construction should resume in the settlement blocs and that any building in other settlements would be permitted only to meet "natural growth."

"This has been a formula that has always been acceptable, even to the previous administration," he said yesterday. "People living outside the settlement blocs must not be punished. A settlement like Tekoa, established under Labor, has a new kindergarten class every year. Will we punish those children and their parents because the Labor government convinced them back then to perform a Zionist act?"

Lieberman's statements were criticized by the right as well as the left.

MK Aryeh Eldad (National Union ) argued yesterday that Lieberman's formula is meant to prepare the ground for a de facto freeze. He said the statements imply that Israel is willing to make concessions on more isolated settlements, since otherwise there is no reason to impose any restrictions on construction there.

However, sources on the left argued that any formula that permits construction in isolated settlements for the sake of natural growth is a vague formula that has previously enabled Israeli governments to trick Washington and continue building in settlements, despite promises to the contrary.

Culture and Sports Minister Limor Livnat also opposed the possibility of a compromise.

"We must prepare for an end to the freeze so that it will not be continued after September 26," said the Likud minister. "I do not think that it would be right to commit to a future freeze before the negotiations with the Palestinians."

Meanwhile, Lieberman also expressed pessimism about the chances that the Washington summit would lead to a resolution of the Israeli-Palestinian conflict.

"We must lower expectations," he said yesterday. "No one has discovered a magic formula, one that puts us on track for a permanent settlement in a year's time."

Lieberman said the Palestinians were heading into direct talks because negotiations were imposed on them, not because they want peace.

"We should not have to pay for the pleasure of sitting with the Palestinians around the table," he said. "They must also pay."