Prime Minister Ehud Olmert on Sunday reiterated his position that the vision of Israel holding onto the West Bank and Gaza Strip as part of its sovereign territory was finished.
"Greater Israel is over. There is no such thing. Anyone who talks that way is deluding themselves," Olmert told the cabinet during its weekly meeting.
He added, though, that this had not always been his stance: "During Camp David I thought that [then prime minister] Ehud Barak's concessions were too much, and I told him as much.
"I thought that land from the Jordan River through to the sea was all ours, but ultimately, after a long and tortured process, I arrived at the conclusion that we must share with those we live with, if we don't want to be a bi-national state."
Meanwhile on Sunday, Channel 2 reported that Olmert will meet Palestinian President Mahmoud Abbas on Tuesday in a last ditch effort to reach agreement on a peace deal with the Palestinians before he steps down when his Kadima party chooses a successor on Wednesday.
Olmert will meet Abbas to try to conclude a U.S.-backed peace plan before President George W. Bush leaves office at the end of this year.
Israeli and Palestinian officials said the parties were working to arrange a meeting this week but that no final date had been set.
Although Olmert has promised to resign after the Kadima ballot, he could stay on as caretaker prime minister for weeks or months until his successor forms a new government.
The media reports said that apart from discussing ongoing issues, Olmert could tell Abbas about a new compensation plan for thousands of Jewish settlers willing to leave their homes in the occupied West Bank.
Sunday's cabinet session focused on the evacuation-compensation bill, which proposes offering NIS 1.1 million to families willing to move out of West Bank settlements.
During the meeting, Vice Premier Haim Ramon presented the cabinet with an outline of bill, which is estimated at a total cost of NIS 2.5 billion. The plan would offer settlers who choose to relocate to the Negev an additional 25 percent compensation and those who agree to move the Galilee region an additional 15 percent.
18 percent of the 60,000 settlers currently living in the West Bank have said they would be willing to relocate. A survey conducted by the Prime Minister's Office showed that more than 11,000 settlers living beyond the security barrier would agree to leave their homes.
Ramon told the cabinet members that, "The evacuation of residents of Judea and Samaria is an unavoidable step for those who believe in two states for two peoples - and that includes most of the Israeli public."
Ramon added that Israel's position in negotiations with the Palestinians and in the eyes of the international community would only be bolstered by an announcement that Israel wants to end its presence in the West Bank.
Shas party Chairman Eli Yishai voiced his opposition to the plan, saying "Whoever brings about the evacuation of settlers will lead to the evacuation of Jerusalem and to the eradication of the Jewish identity."
Yishai said that his ultra-Orthodox Shas would do everything in its power to prevent the proposal from being implemented. "This legislation is a colossal strategic mistake and presents Israel as lacking in principles. We still have not recovered from the cursed expulsion and there are people dragging us into further expulsion," he said, referring to Israel's 2005 disengagement from the Gaza Strip.
Public Security Minister Avi Dichter said: "This discussion is fundamentally flawed and problematic. It is a little like putting the cart before the horse. Even if homes are legally demolished, it will be hard to prevent them from being rebuilt, and it could get violent. Voluntary evacuation will only serve to weaken rather than strengthening Israel."
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