Prime Minister Benjamin Netanyahu on Monday added weight to recent speculation that peace talks could soon resume between Israel and the Palestinians, telling lawmakers from his Likud party that he sensed "a change in the air."

"In recent weeks I have felt that there is a certain change in the air, and I hope that this will mature, allowing the start of the diplomatic process," Netanyahu told the Likud Knesset faction.

"Israel is ready for a peace process with the Palestinian Authority, without preconditions," he said, adding that he has urged the Palestinians to enter such negotiations since he formed his government in April.

"We are serious in our intentions to reach a peace agreement," he said, but cautioned that "diplomatic plans said to be in my name that have appeared in the media have no truth to them."

Leiberman to Blair: Peace in two years 'unlikely'

But Foreign Minister Avigdor Lieberman warned Quartet peace envoy Tony Blair earlier Monday that the prospects of Israel and the Palestinians reaching a final-status agreement within two years were unrealistic.

"It is important to hold an honest, open dialogue with the Palestinians without sowing delusions that are disconnected with reality and that will only lead to violence and frustration," Lieberman told the former British premier. "It is not possible to reach a full agreement within two years."

"This is not a realistic goal," the foreign minister said. "We need to begin direct talks without committing to any timeframe."

"In the past, timetables were set and not met and this led to violence," Lieberman went on.

Egyptian sources told the Cairo-based daily Al-Ahram on Monday that Barack Obama's administration will put forward a plan whereby Israel would commit itself to the establishment of a Palestinian state within two years of the launch of peace talks with the Palestinian Authority.

As part of the plan, both Israel and the Palestinians would present written guarantees underlining their obligations prior to the completion of final-status talks, an Egyptian Foreign Ministry spokesperson told Al-Ahram.

Meanwhile, Palestinian President Mahmoud Abbas met his Egyptian counterpart, Hosni Mubarak, in the Egyptian resort town of Sharm el-Sheikh on Monday to discuss Israel's latest offer for the renewal of talks with the Palestinian Authority.

The meeting comes in the wake of Netanyahu's visit to Cairo last week, where he presented some ideas for jump-starting the diplomatic process.