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Prime Minister Ehud Olmert met with Quartet envoy Tony Blair Tuesday night and discussed "practical steps" needed to develop the Palestinian economy and Palestinian governing institutions, officials in the Prime Minister's Office said.
They said the two men discussed how to attract investors to the Palestinian Authority in a way that would be beneficial to all sides.
Blair arrived Tuesday for a second visit as Quartet envoy since taking over the job in July. He will be here for 12 days.
Olmert and Blair held a one-hour dinner meeting with their staffs and then met privately for another hour.
Officials in the Prime Minister's Office said security issues were discussed, but provided no details. The meeting was described as "informal," with Blair saying his visit was a learning trip.
Meanwhile, Israel is considering the release of some 100 Palestinian prisoners before Ramadan as a goodwill gesture to PA Chairman Mahmoud Abbas, officials in the Prime Minister's Office said Tuesday.
They said the criteria for the release of the prisoners will be the same that governed the release of some 250 prisoners in July: they will all be from Fatah, they must renounce terrorism and they must have served a significant amount of time but still have more than a year left in their sentences.
Preliminary meetings on this matter have already been held in the Justice Ministry and the release of prisoners before Ramadan, next week, is seen as a way of strengthening Abbas.
Blair arrived here from Egypt and began setting up operations from the American Colony Hotel in east Jerusalem. Prior to coming to Israel, he held talks in Saudi Arabia with Saudi King Abdullah and in Egypt with Egyptian President Hosni Mubarak. He is scheduled to be in Israel until Friday, when he goes to Jordan for two days, and then returns to Israel.
Diplomatic officials have described the visit, which Blair is trying to keep low-profile, as preparation for a meeting of donor countries to the Palestinians, known as the Ad Hoc Liaison Committee, in New York on September 24, and a meeting of the Quartet the day before.
Blair is scheduled to meet with Defense Minister Ehud Barak and Defense Ministry officials on Wednesday. During the visit he is expected to concentrate on ways to ease transportation access for Palestinians in the West Bank.
Blair is also expected to meet briefly in Jerusalem on Wednesday with Italian Foreign Minister Massimo D'Alema, who is arriving for less than 24 hours for meetings with Israeli leaders.
Olmert, who will also meet D'Alema, is expected to reiterate Israel's position that any contact with Hamas is counterproductive and is not only bad for Israel, but also undermines Abbas.
D'Alema, from the left wing of Italy's governing coalition, has been a leading voice in Europe calling for some kind of contact with Hamas and for pushing a Hamas-Fatah reconciliation.
"There is a need for conciliation among the Palestinians to achieve peace treaties," the Kuwait news agency quoted him as saying on Saturday at a meeting of his Democrats of the Left party.
"There cannot be a peace agreement with half of the Palestinian people," D'Alema reportedly said.
In July, D'Alema sparked controversy by saying that the West's policy of isolating Hamas could backfire and push it into the arms of al-Qaida.
He also said at the time that sidelining Hamas was not "a great lesson in democracy," and "Hamas has been involved in terrorist activity, but it is also a popular movement."â€¢