Prime Minister Binyamin Netanyahu will travel to Egypt on Monday for his first trip abroad since taking office, a symbolic move government officials say is designed to signal the importance he places on relations with Cairo and moderates in the Arab world. That Netanyahu is visiting Egypt even before he goes to the US, where he will travel on May 17, shows how important he feels the ties with Egypt are, one government official said. Egyptian-Israeli relations were strained earlier in the year by the appointment of Avigdor Lieberman as foreign minister. The official said the meeting with Egyptian President Hosni Mubarak in Sharm e-Sheikh would also show the importance Israel attached to the involvement of moderate Arab countries in the peace process, as well as in containing Iran and its local proxies Hizbullah and Hamas. Israel would like to see Egypt, Jordan and Saudi Arabia play a greater role in the peace process, as well as in pushing back against Iranian efforts to make further inroads in the region, the official said. Netanyahu believes that while the Iranian threat is a very serious challenge, it also provides an opportunity because Iran does not just threaten Israel, it is also a direct threat to the region, according to the official. As such, the Iranian threat has created the possibility of enhanced cooperation and dialogue between Israel and its neighbors, "something that ultimately could be very significant in building peace." National Security Council head Uzi Arad was reportedly in Egypt earlier in the week preparing for the upcoming meeting. Meanwhile, neither the Prime Minister's Office nor the Foreign Ministry had any comment Wednesday on reports in the London-based pan-Arab daily Al-Quds al-Arabi that Arab leaders were formulating a new peace offer, more detailed than the original Arab initiative from 2002, that would include a proposal for resolving the two thorniest final-status issues: Jerusalem and the refugee problem. According to the report, which relied on Palestinian sources, the new initiative was being led by Jordan's King Abdullah II at the behest of US President Barack Obama. The offer would reportedly call for the establishment of a demilitarized Palestinian state with Jerusalem as its capital and for the Old City to be designated as an "international zone." The question of borders would be resolved through land swaps. The report said that some of the descendants of Palestinian refugees from the War of Independence in 1947-49 would be allowed to move to the Palestinian state, while others would be naturalized in their countries of residence throughout the Arab world. According to the report, the idea of a revised Arab peace plan emerged during Abdullah's meeting with Obama in Washington last month. The US president reportedly asked the Jordanian monarch to formulate a new offer that would elucidate some of the issues that were vague in the original peace initiative. Immediately upon returning to Amman, Abdullah took off for Riyadh to begin hammering out the new plan with his Saudi counterpart. According to the paper, Abdullah met with Palestinian Authority President Mahmoud Abbas on Sunday and filled him in on the details. On Monday, he did the same with Syrian Foreign Minister Walid Muallem. Palestinian sources quoted in the report said Obama had requested that the plan outline a "timetable for normalization and the establishment of diplomatic ties between Israel and the Arab world, which will encourage Israel to employ the necessary means in order to create a demilitarized Palestinian state." The revised initiative, the sources said, "will allow the Israeli flag to billow in all the capitals of the Arab world, while the Palestinian flag will be raised in the Arab neighborhoods of east Jerusalem, which will be the capital of the Palestinian state." The UN banner will fly over the holy sites of Jerusalem's Old City, the sources were quoted as saying. The Palestinian sources said the new initiative conceded that an influx of refugees and their descendants into Israel was broadly perceived as an existential threat to the Jewish state. The refugees "cannot return to the occupied Palestinian territories of 1948," they said, "for, according to the Americans' point of view, this would pose a danger to Israel's future." Abdullah, meanwhile, said in Berlin on Wednesday that Israel, Syria, Lebanon and other Arab nations would sit down together to try to resolve the Middle East conflict under a new "combined approach" currently under discussion with the US. "What we are discussing today is a combined approach of bringing together Arabs, Europeans and the United States as a team to create the circumstances over the next several months that allow Israelis and Palestinians to sit at the table, but also with Lebanese, Syrians and Arab nations," Abdullah told a news conference. "So it is a packaged effort that we are going to work on... and I would imagine that the plan will be more articulated by the president of the United States after Prime Minister Netanyahu's visit to Washington," he added. Netanyahu is expected to meet with Obama on May 18, and by the end of the month Obama is also expected to have met separately with Abbas and Mubarak. Meanwhile, Netanyahu - following a meeting Wednesday night with Quartet envoy Tony Blair - announced the establishment of a ministerial committee, that he will head, to develop the Palestinian economy and improve the quality of life in the PA. The committee will be made up of Defense Minister Ehud Barak, Foreign Minister Avigdor Lieberman, Finance Minister Yuval Steinitz, and Silvan Shalom, the minister for regional development and development of the Negev and Galilee. A statement put out by Netanyahu following the Blair meeting said he will ask Shalom to start a number of economic projects in the near future in Jenin, Jericho and a baptismal site on the Jordan River. Blair also said on Wednesday that the Obama administration and international negotiators were drafting a new strategy for Israeli-Palestinian peace talks and expected to unveil it within six weeks. He did not provide any further details. At a meeting later in the day with EU ambassadors in Israel, Blair said the Quartet was not going to unveil any new plan, but was waiting to see how to move the diplomatic process forward after Obama's meetings with the Middle East leaders later this month. The Quartet is scheduled to hold its next meeting in June, after Obama's meetings with Netanyahu, Mubarak and Abbas, although representatives of the Quartet may meet on the sidelines of a discussion scheduled for Monday in the UN Security Council. Arab diplomats, meanwhile, say the Obama administration is pressing them to amend their 2002 peace initiative to make it more acceptable to Israel. The plan - first proposed by Saudi Arabia - called for a complete withdrawal to the pre-1967 lines, including in east Jerusalem and on the Golan Heights, and a return of Palestinian refugees. Arab League Secretary General Amr Moussa, who traditionally takes a very hard line on Israel, rejected that suggestion. "There is no amendment to this initiative. We have received nothing from the other side... no initiative, no response and no proper talking about peace, so why should we change or amend, and for what reason?" he said. Egyptian Foreign Ministry spokesman Hossam Zaki also denied the reports, telling The Jerusalem Post, "I don't know where this idea came from. As far as Egypt is concerned, the idea does not exist and is not under consideration." In a related development, Lieberman arrived in Prague on Wednesday for talks with his outgoing Czech counterpart, Karel Schwarzenberg, whose country presides over the European Union until June 30. Lieberman, on his first foreign tour since taking office, arrived in the Czech Republic from Italy and France, and is scheduled to go to Berlin on Thursday, before returning home. EU foreign policy chief Javier Solana, with whom Lieberman also met on Wednesday, said the European Union would only make a decision on a frozen plan to upgrade ties with Israel when Jerusalem completed its review regarding peace negotiations with the Palestinians. During talks with Lieberman in Prague, Solana said that "not much has advanced" and that Israel was well aware of the EU's stance, which calls for a two-state solution. "They are in the process of review," he told reporters. "They have to see how they can make something that is compatible with that." Brenda Gazzar contributed to this report from Cairo.