JERUSALEM -- Israel agreed Saturday to release $100 million in frozen funds to Palestinian President Mahmoud Abbas and ease West Bank travel restrictions -- goodwill gestures that revived hopes for a resumption of peace talks after years of hostility and distrust.
Prime Minister Ehud Olmert made the promises in a two-hour meeting with Abbas at the Israeli leader's official residence. It was the first Israeli-Palestinian summit in 22 months and came as both men face political problems at home that could be eased by a peace breakthrough.
Olmert and Abbas failed to agree on a key issue -- a prisoner swap -- but decided to set up a committee to study it further.
The issue is not fully in Abbas' hands. Olmert has said he will not free Palestinians without the release of an Israeli soldier being held by militants allied with the Islamic group Hamas, which controls the Palestinian government and is a rival of Abbas' Fatah party.
Olmert set a cordial atmosphere at the start of the meeting. He emerged from his residence to greet Abbas, shaking hands and kissing the Palestinian leader on both cheeks. Abbas was then introduced to Olmert's wife, Aliza, an artist known for her dovish views.
During their talks, the two leaders took seats opposite one another at a long table, set for a meal and covered by white cloth. Israeli and Palestinian flags served as table decorations.
Olmert's office issued a statement saying both men agreed to cooperate as "real partners" and described the meeting's atmosphere as friendly.
"Both leaders agreed that this meeting was the first step toward rebuilding mutual trust and fruitful cooperation," the statement said.
Palestinian negotiator Saeb Erekat, who participated in the talks, said the two leaders agreed to hold more meetings, but did not set a date.
Erekat and Olmert spokeswoman Miri Eisin said the Israeli leader agreed to transfer $100 million in frozen tax rebates and other Palestinian funds to Abbas' control, giving the Palestinian leader an important achievement.
Funds not for Hamas
The Palestinian economy has suffered from the cutoff of funds, along with a Western aid freeze, which began after Hamas took control of the Palestinian government after winning legislative elections early in the year.
Eisin said Israel plans to transfer the money soon, but that it wants to make sure the funds do not reach Hamas, which has refused Western demands to recognize Israel and end violence.
In addition, Israel will transfer about $7.25 million to Palestinian-run hospitals in Jerusalem, Erekat said.
Getting control of the money will allow Abbas' office to increasingly take on the role of a shadow government in the Palestinian territories, where the international boycott of Hamas has made it difficult to pay the salaries of 165,000 Palestinian civil servants.
Israel also agreed to remove several roadblocks in the West Bank to make travel easier, Erekat said. Olmert also promised to meet a quota of letting 400 trucks move through the main cargo crossing between Gaza and Israel.
Abbas is locked in an increasingly bitter and violent showdown with Hamas. Last week, he said he would seek early elections, a dramatic challenge to the 10-month-old Hamas government.
His announcement intensified factional fighting between Abbas-allied security forces and Hamas gunmen, particularly in the Gaza Strip, and there are fears Palestinians will descend into full-scale civil war.
Underscoring Abbas' difficulties, the exiled supreme leader of Hamas, Khaled Mashaal, vowed Saturday that elections will not take place.
"Is it possible to speak of early elections, and the elections (previous) are still fresh? Is it possible to violate the law and the constitution?" he told the Arab satellite TV station Al-Jazeera. "Any step that violates the law will not be (allowed)."
Olmert, who was elected in March, lost much of his popularity during Israel's summer war in Lebanon with Hezbollah guerrillas, which many Israelis believe ended inconclusively.
The war also discredited Olmert's political program, which was built on a promise to withdraw from much of the West Bank and draw Israel's borders unilaterally by 2010 without waiting for a peace deal.
Olmert and Abbas had met once briefly over breakfast in Jordan in June, under the auspices of Jordan's King Abdullah II, but simply agreed to begin preparations on more substantive talks.
The last summit was Feb. 8, 2005, when Israel's then-Prime Minister Ariel Sharon met with Abbas in Egypt and announced a cease-fire.
In the Gaza Strip, Palestinian factional fighting persisted. In the southern town of Rafah, assailants fired on the car of a senior Palestinian security official, critically wounding him and injuring a bodyguard and a girl.
The target, Hassan Jarbouh, is the deputy chief of the Rafah branch of the Preventive Security Service, which is loyal to Abbas. Preventive Security blamed Hamas for the attack.