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Vice Premier Shimon Peres told Haaretz on Tuesday that Israel was "not just waiting for formal recognition by Hamas", but also wanted "active recognition in the form of the group's presence at peace negotiations."

Peres was referring to the weekend agreement between Fatah and Hamas at a Mecca summit to form a unity government. The terms of the agreement say that the new government will "respect" previous peace accords between Israel and the Palestinians, but makes no commitment to abide by them. The accord also makes no mention of two other key international demands, namely recognition of Israel and renunciation of violence.

Speaking during a tour of the Galilee with foreign diplomats, Peres said that the Mecca accord has "several interpretations, and we must explore them and they play out on the ground."

"There are still many question marks regarding the agreement, and several things that will be put to the test, including the release of captured soldier Gilad Shalit, which is one of the most important tests and could remove the barrier to continued talks."

Meanwhile, Israeli and Palestinian leaders are embroiled in a bitter dispute over what topics should be on the agenda of next week's trilateral summit.

The summit, involving Prime Minister Ehud Olmert, Palestinian Authority Chairman Mahmoud Abbas and U.S. Secretary of State Condoleezza Rice, is scheduled to take place in Jerusalem on Monday.

Despite the dispute, Rice is insisting on holding the meeting to demonstrate progress in Israeli-Palestinian relations.

According to government sources, however, Olmert is refusing to discuss three major elements of any final-status agreement - Palestinian refugees, the status of Jerusalem and an Israeli withdrawal to the pre-1967 armistice lines - because he believes that raising any of these issues would doom the talks to failure.

"There is no doubt that Abu Mazen [Abbas] will have to make compromises on these issues, given Israel's positions, and it is not clear that he can get them past the Palestinian street," one source said.

Foreign Minister Tzipi Livni also believes that final-status issues should not be discussed now, lest they cause the talks to fail and spark renewed violence, as was the case after the Camp David summit of July 2000. She believes the talks should focus on establishing a Palestinian state within temporary borders, as proposed in the second stage of the road map peace plan.

Olmert and Livni also insist that any discussions be purely theoretical, with implementation conditioned on fulfillment of the road map's first stage: dismantling Palestinian terror organizations.

Because of the difficulties that discussing final-status issues would create, "the artificial definition selected for these talks is a 'political horizon.' We are no longer sitting and forming committees on the refugees and Jerusalem," a government source said.

Olmert also intends to stress that the three-way summit is not a substitute for direct bilateral negotiations, which should be the main channel for progress.

However, Abbas presented over the weekend a position that diametrically contradicted Olmert's views. "We agreed with [Secretary] Rice that it is necessary to discuss a final-status arrangement and to begin negotiations on permanent borders, the settlements and the refugee problem," he said in Cairo. Abbas also reiterated his opposition to any discussion of a Palestinian state within temporary borders.

Meanwhile, an American team is already in Israel working on the preparatory requirements of the summit.

American and Israeli sources said Monday that the meeting will take place in one of three sites: the Prime Minister's office, the Prime Minister's residence, or the David Citadel hotel, where Rice will stay.

Holding the meeting at a hotel instead of an Israeli official site will bolster the impression of equal status among the three sides.

It is also likely that a joint press conference will be held at the end of the summit, even though in the previous meeting between Olmert and Abbas at the end of last year, the two leaders did not appear before the press after their meeting.

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