Israel and the Vatican will negotiate the status of real estate here that the Church has a claim to, as part of a plenary meeting of a joint economic commission starting Thursday.
A Foreign Ministry statement said that the negotiations, headed on Israel's side by Deputy Foreign Minister Danny Ayalon, "are in their final stages after reaching significant understandings in recent months," including regarding taxation and the legal status of Vatican personnel.
Israel's envoy to the Vatican, Motti Levy, told Israel Radio on Wednesday that the talks wouldn't focus only on sites holy to Christianity, but on other lower-profile property as well, and said that the most-discussed site, the room of the Last Supper, wouldn't be handed over to the Church.
"Regarding the Last Supper room, it has a long history," said Levy. "The Ottoman Empire disinherited the Vatican of the room in 1524, and their old dream is to restore past glory.
"There is no chance it will happen," he continued.
Levy also emphasized the positive spirit of the talks.
"They are not demanding, rather politely requesting," he said of the Vatican's claim to the Last Supper room. "It has not been in their hands for 400 years, and I don't foresee a change in the near future.
"The negotiations taking place now are only about property in which [the Vatican] unequivocally has no other partner from other churches, but is only theirs and is indisputed.
"The negotiations are about what kind of benefits they will receive from us, what [tax] exemptions, but not about new assets they want to regain," he explained.
Some six months ago, it was reported that President Shimon Peres was willing to transfer sovereignty of key Christian holy sites to the Vatican, a proposition that ruffled feathers among senior government officials.
The president reportedly exerted pressure on the government to give up sovereignty over several sites, including the Church of the Annunciation in Nazareth, the Coenaculum on Mount Zion, Gethsemane on the Mount of Olives in Jerusalem and the Church of the Multiplication on the Kinneret.
The Israel Radio report quoted Beit Hanassi as saying that talks had been going on long enough, and that the time had come to compromise with the Vatican and come to an agreement.
Relinquishing sovereignty over the sites would mean they would legally belong to Vatican City, and that any Israeli request to pave roads or lay water, sewage or electrical infrastructure would have to be approved by the Vatican.
Some members of the government said they weren't opposed to the idea out of hand, and questioned the possible benefits the transfer of sovereignty could bring to the economy.
"If we were sure that this present to the Christian world would bring millions of Christian pilgrims here, then we would have a good reason to think about it," Tourism Minister Stas Meseznikov was quoted as saying in the report. "But since we're not sure that it will happen, why should we give out gifts?"
Former Meretz chairman Yossi Beilin, however, was quoted as saying that Israel had not behaved satisfactorily in recent dealings with the Vatican.
"We need to compromise with them," he said.
Abe Selig contributed to this report.