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President Shimon Peres expects to receive American and European support for the peace proposal he submitted to Prime Minister Ehud Olmert this week.

Sources in Jerusalem said they have heard from American counterparts that the Iraq imbroglio has increased Washington's interest in an Israeli-Palestinian breakthrough.

Peres also hopes that his former colleagues in the Kadima and Labor parties will back Olmert in adopting the proposal, which calls for an "agreement of principles" in which Israel would promise a Palestinian state on territory equal to 100 percent of the West Bank and Gaza, to be achieved via territorial exchanges. The document also calls for establishing a Palestinian state in temporary borders as a first stage.

Palestinian Authority Chairman Mahmoud Abbas, who used to be bitterly opposed to the idea of temporary borders, is now willing to discuss it, as long as it is accompanied by a timetable for completing negotiations on a final-status agreement. These negotiations - which would, inter alia, finalize the details of the territory Israel would give the PA in exchange for settlement blocs covering about 5 percent of the West Bank - would thus be held between two sovereign states.

Yisrael Beiteinu, one of Olmert's coalition partners, advocates giving the PA certain Israeli Arab towns as part of this territorial exchange, but that is not part of Peres' proposal. The president's office said that Peres vehemently objects to the forcible transfer of Israeli citizens to a foreign entity; this would be possible only if all the parties, including Israeli Arabs, agreed.

The proposal does not suggest a solution to the refugee issue, but Abbas said publicly last week that there is no way to force a sovereign state such as Israel to open its gates to refugees, and PA Prime Minister Salam Fayad similarly told Haaretz in a recent interview that any solution to the problem would require Israel's agreement. However, these statements were criticized by Hamas and even some senior Fatah officials. At a speech to the Fatah Central Committee over the weekend, for instance, Hani al-Hassan, who was close to former PA chairman Yasser Arafat, assailed any concession on the refugees' "right of return" to Israel.

Barak Ravid adds:

Olmert's office vehemently denied yesterday's Haaretz report on the plan, which said that the premier was studying it and might adopt at least some of its elements.

"We are not familiar with any plan like the one described in the article, and it is not being considered or discussed in any way," it said.

A senior official in Olmert's office added: "We have not received any position papers or written proposals from Peres. He and the prime minister discussed some ideas, but nothing resembling what was published.

"In any case, what is happening now in the diplomatic process does not mesh with the plan that was published. There is no such plan, and no one is working on such a plan," the official added.