Israel Labour leader ready for talks on Arab peace plan

But the Labour leader made clear that, unlike some of his cabinet colleagues, he was not fully signed up to the plan's provisions, which embrace the return of all Arab territories seized in 1967, including annexed east Jersualem and the Golan Heights.

"This plan could serve as a basis for negotiation," Peretz said, while underlining that this did not imply his "acceptance of the plan."

The absence of any peace process was "not in the interests of Israel, which should take the initiative in relaunching one," he added.

In early October, Justice and Housing Minister Meir Sheetrit of Prime Minister Ehud Olmert's centrist Kadima party said Israel should bite the bullet and accept the provisions of the Arab peace initiative originally drafted by pro-Western Saudi Arabia.

"We should take the bull by the horns and, when I say that, I mean we should accept the moderate countries' initiative, the Saudi initiative," Sheetrit said.

He said Israel should be willing to withdraw from all Arab territory occupied in 1967 in exchange for the "complete peace" and negotiated settlement of the Palestinian refugee question stipulated in the Saudi blueprint.

"If we are talking about overall peace, if we want overall peace, we are compelled to accept all the elements of the initiative and withdraw to the 1967 borders," he said.

Olmert later disavowed his party colleague's comments insisting the Arab initiative did not constitute a basis for negotiations.

But his defence minister has been facing mounting criticism from doves within his centre-left Labour party since an about-turn on the admission to the governing coalition of the ultra-nationalist Yisrael Beitenu party of Deputy Prime Minister Avigdor Lieberman.

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