Israel favours Mideast peace deal without Jerusalem

JERUSALEM (AFP) - Israel wants to reach a peace deal with the Palestinians by the end of the year but postpone a final agreement on the future status of Jerusalem, a senior government official said on Sunday.

"Both sides are interested in reaching a full agreement by the end of 2008 and believe it is possible," the official said after the latest meeting between Israeli Prime Minister Ehud Olmert and Palestinian President Mahmud Abbas.

The meeting was held at Israeli Prime Minister's residence in Jerusalem.

"But since the question of Jerusalem is not solvable within this timeframe they will have to agree to postpone an accord on this issue and agree on a mechanism and a timetable for Jerusalem," the official said.

The remarks came amid mounting pressure to show progress in slow-moving US-backed peace talks as Olmert prepares to step down to battle a graft scandal following a September 17 party leadership election.

Olmert's spokesman Mark Regev insisted Olmert's early departure from office "would not interfere with the discussions."