The idea was splashed across all of Israel's main newspapers as Palestinian negotiators held talks about resuming peace dialogue in Brussels with envoys of the Middle East Quartet of peacemakers -- in a session which Israel declined to attend.

"The Palestinians are unwilling to enter into serious negotiations and therefore we should examine the idea of a long-term interim arrangement," a senior source in the premier's office told Israel Hayom, a newspaper considered close to Netanyahu.

"In light of the instability in the region, the only possibility is to go for an interim arrangement, on condition that it is a long-term one -- and this is what we are currently examining," he said, referring the unrest sweeping the Middle East.

Details of the plan are still sketchy but the idea is believed to involve the establishment of a Palestinian state within temporary borders, while at the same time holding talks on the principles of final status issues, the Haaretz newspaper said.

News of Netanyahu's intentions were leaked to the press as the Quartet sought to push both sides into renewing some kind of peace negotiations, which ran aground last autumn over an intractable dispute about settlements.

Netanyahu had been expected to send his chief negotiator Yitzhak Molcho to the Brussels talks, but decided to skip the meeting when it became clear there would be no direct contact with their Palestinian counterparts, Haaretz said.

"The moment there were no direct talks, there was no reason to fly out there," a source in Netanyahu's office told the paper.

Since the expiry in September of a temporary ban on settlement building -- which Netanyahu refused to extend -- the Palestinians have refused all direct contact with the Israelis, saying they will not talk while settlers build on land they want for a future state.

Members of the Palestinian negotiating team, headed by Saeb Erakat, are currently in Brussels to negotiate the parameters of the Quartet statement that will be issued after a top-level meeting of the principals when they meet in mid-March, Palestinian sources told AFP.

earlier related report
Israel okays 14 new east Jerusalem settler homes
Jerusalem (AFP) March 2, 2011 - Jerusalem municipality has approved construction of 14 new apartments in an abandoned Israeli police compound in occupied east Jerusalem, a councillor told AFP on Wednesday.

Pepe Alalu, of the opposition Meretz party, said the 14 new units were to be built in the Ras al-Amud neighbourhood on land owned by a Jewish religious trust which was also seeking permits for a further 104 housing units next to the police building.

"I strongly condemn this," he said. "It's really problematic."

The Haaretz newspaper said the plan was to link up the Ras al-Amud housing with the adjacent Jewish enclave of Maaleh Zeitim, where more than 100 families now live.

US-brokered peace negotiations between Israel and the Palestinians stalled late last year over a bitter dispute about settlement building.

Since the expiry of a 10-month Israeli ban on new settlement construction, the Palestinians have refused all direct contact with Israel, saying they will not talk while settlers build on land they want for their promised state.

Israel regards the whole of Jerusalem, including the eastern sector which it occupied during the 1967 Six Day War, as its "united and undivided capital" in a move which has never been recognised by the international community.

The Palestinians want the city's eastern sector as the capital of their promised state.

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