Barak says Israel must be respected as Jewish state

Israeli Defence Minister Ehud Barak said on Sunday that more needs to be done for the creation of a Palestinian state, including Arab recognition of Israel as a Jewish state.

Barak was speaking after talks with Egyptian President Hosni Mubarak, intelligence chief Omar Suleiman -- Egypt's pointman for Palestinian affairs -- and Defence Minister Hussein Tantawi during a brief visit to Cairo.

"More steps must be taken in order to reach a situation where it is possible for Israelis and Palestinians to live in two states side by side in peace and with mutual respect," Barak told reporters after the talks.

He said "intense efforts will be exerted over the coming weeks to pave the road for the way forward."

But Barak stressed that any final settlement of the Palestinian question must include "respect for the nature of Israel as a state for the Jewish people."

The defence minister refused to comment on the fate of Gilad Shalit, an Israeli soldier captured by Gaza militants almost three years ago.

He said matters like Shalit's release needed to be dealt with "in secrecy and away from the media."

The two also discussed the situation in Iran and Lebanon, Barak told reporters.

The pan-Arab daily Asharq Al-Awsat quoted Israeli sources as saying that "a new development has led to tangible progress," without elaborating on its nature.

"The most important issue to be discussed is the prisoner exchange," the paper said.

"Hamas realises that (Benjamin) Netanyahu's government will not accept anything that (his predecessor Ehud) Olmert's government did not accept," it added.

"There is a new list of Palestinian prisoners that Hamas wants released.

"Netanyahu's government also realises that it must stop the blockade on Gaza and stop using the blockade as a way to bring down Hamas."

A senior official at Israel's defence ministry told AFP that during the talks "the Egyptians also raised the topic of opening more crossings between Israel and Gaza. Barak promised to work towards progress on the issue."

Israel has kept up a tight blockade of Gaza, allowing in only limited humanitarian supplies, ever since the Islamist Hamas movement seized control of the territory from forces loyal to Western-backed Palestinian president Mahmud Abbas two years ago.

Barak's visit follows a landmark speech delivered by US President Barack Obama in Cairo on June 4 in which he outlined his strategy for re-launching faltering Middle East peace talks.

It also came a week after the hawkish Israeli premier endorsed the principle of a Palestinian state for the first time, albeit demilitarised and with no control over its own air space.

Barak, who heads the centre-left Labour party, hailed Netanyahu's speech as a "major step forward in the right direction."

Mubarak said a peace deal was "within reach" but that Israel must stop settlement activity in the occupied West Bank, an increasingly vocal demand of the Jewish state's principal ally the United States.

Egypt and Israel signed a historic peace treaty in 1979, the first between Israel and an Arab state.