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Former British prime minister Tony Blair said Friday that a two-state solution to the Israeli-Palestinian conflict could be within reach if Israel compromises on issues such as halting settlement expansion.

"There is a virtual consensus across the international community not just as to what needs to happen, but how...which was not the case a couple of years ago," Blair, who represents the Quartet of Middle East mediators, told Reuters.

"If Israel were to join that, we could get an agreement and an agreement in my view that protects completely the state of Israel."

Blair added that Prime Minister Benjamin Netanyahu's election could prove a blessing, since his right-leaning government could have the domestic support to make concessions.

"I hope and believe Prime Minister Netanyahu is sincere about wanting a Palestine state and wanting to help create one. If he is, he could be in a strong position to deliver it," Blair said.

Netanyahu's assumption of power in March sparked concerns that the Middle East peace process would stall in light of his reluctance to back Palestinian statehood.

But world leaders have recently voiced optimism over the chances of peace following a speech the premier delivered two weeks ago, in which he declared support for a demilitarized Palestinian state.

A statement issued Friday by the Quartet, which includes the United Nations, the United States, Russia and the European Union, called for Israel to halt all settlement activities and for Palestinians to combat violent extremism.

The group met on the sidelines of a G8 foreign ministers' meeting in northern Italy.

Direct talks between Israel and the Palestinians could resume soon, Blair said, but the process was at a delicate stage as foreign powers stepped up calls on Jerusalem to ensure a Palestinian state would not be undermined by settlements.

Netanyahu, who heads a right-leaning coalition that could be fractured if he agreed to a settlement halt, has reiterated his intention to continue building within existing settlements in the West Bank to accommodate the "natural growth" of families.

Blair added: "The advent of the Obama administration has given a new sense of energy and commitment and to a certain extent hope... However, the challenges are still there."

G8 urges Israel to halt settlement building

Earlier Friday, the world's richest nations earlier called on Israel to halt construction in West Bank settlements, including that which Jerusalem seeks to pursue to accommodate natural growth.

U.S. envoy George Mitchell told a news conference after the Quartet meeting in Italy that the United States hoped Israelis and Palestinians would soon begin "meaningful and productive" peace negotiations.

"We believe we are making progress in these efforts and we hope very much to conclude this phase of the discussions and to be able to move into meaningful and productive negotiations in the near future," he said.

"We are now trying very hard to seize the very favorably created political atmosphere, of Obama's election to push the peace process forward," UN Secretary-General Ban Ki-moon told the conference.

The Group of Eight powers also deplored violence in Iran after its disputed election on Friday and urged Tehran to settle the crisis soon through democratic dialogue, according to the final draft statement seen by Reuters.

"We deplore post-electoral violence which led to the loss of lives of Iranian civilians and urge Iran to respect fundamental human rights including freedom of expression...," G8 foreign ministers said in the statement.

The G8 called on all parties to "re-enter direct negotiations on all standing issues consistent with the roadmap" and it called for a freeze in settlement construction in the West Bank.

"We also call on both parties to fulfill their obligations under the road map, including a freeze in settlement activity (as well as their 'natural growth') and an unequivocal end to violence and terrorism," the statement read.

"We call on all parties to re-enter direct negotiations on all standing issues consistent with the road map, the relevant UNSC resolutions and the Madrid principles."