The western wing of the American Colony Hotel in East Jerusalem has been transformed over the past few days into the improvised office of the Quartet's envoy overseeing the disengagement plan, James Wolfensohn. The rooms have been furnished with desks, computers and filing cabinets; cartons of paper for the printer fill the bathtub; and the envoy has a bulletproof BMW, a diplomatic staff and security guards from the U.S. State Department to ferry and accompany him to and from the Prime Minister's Office in Jerusalem, the Defense Ministry in Tel Aviv, and meetings with senior Palestinian Authority officials and Israel and Palestinian businessmen.

Wolfensohn, until recently the president of the World Bank, is charged with overseeing the economic and civilian coordination of Israel's withdrawal from the Gaza Strip and northern West Bank, as well as forwarding initiatives to rehabilitate and develop the Palestinian economy. He is working in conjunction with the U.S.'s security coordinator, General William Ward; but unlike Ward, who spends most of his time in the region, Wolfensohn prefers to stop over every few weeks rather than to remain more permanently.

He believes it is better for him not to be dragged into dealing with the small details, but to oversee things from the outside.

In an interview yesterday with Haaretz, Wolfensohn spoke of distinct progress in the talks on coordinating the pullout between Israel and the PA. "In the first weeks, all the negotiations were on the agenda... What we've managed to do in the last couple of weeks is to say that we're actually getting into negotiations on the specifics," he commented.

Wolfensohn spoke of a number of key issues slated for discussion, with the list headed by the matter of the crossings between "the Palestinian areas" and Israel. "To the Palestinians, as well as for the Israelis, it's clear that you cannot create a prison in Gaza, or the northern West Bank, and if you do that, there is no possibility for either hope or peace," he said. "So it's in the interest of both sides, both economically and in terms of the future, to have appropriate methods of moving people and goods in a secure way."

The second key issue, according to the envoy, is that of the link between Gaza and the West Bank, with Wolfensohn noting the need for a physical connection between the two areas, as well as interim arrangements until this connection - a road, or rail line - is in place.

Wolfensohn believes the solutions vis-a-vis the crossings, the link between Gaza and the West Bank, and the easing of restrictions on movement in the West Bank itself must strike a balance between preserving Israel's security and the need to facilitate the passage of people and goods on the Palestinian side.

"They're all the same issue of how to build confidence, trust and security in order to free up economic and social progress," Wolfensohn said. "And the sad thing is that the level of confidence between Israelis and Palestinians at this moment is at its lowest in the past 10 years, so it's not an easy task to reestablish confidence."

"The problem I have in this part of the world, which I love, is that everybody is so hyped up about the other side that these irrational rumors emerge in the debate. And everybody has an angle," he continued.

"The principle for Israelis is clearly security, and we need to find solutions that within the framework of security enable a better life for the Palestinians - and I believe it is possible. I also believe that a better life for the Palestinians is one of the more important elements in Israeli security." He added: "If you have a people that have a sense of hope, they're much less likely to go out and shoot you."