There are no guarantees the Arab world would move forward with steps of normalization toward Israel if Jerusalem declared a settlement freeze, according to assessments reaching Jerusalem, even though US President Barack Obama still believes he can convince Saudi King Abdullah to make some gesture toward Israel. The assessments come amid reports that Israel and the US are working on a package deal that may include a time-limited moratorium on settlement construction in return for gestures from the Arab world. According to these assessments, however, the Persian Gulf and North African states are unlikely to make significant moves unless Saudi Arabia does, and the Saudis believe they made their gesture toward Israel in the form of the 2002 Arab peace initiative. Obama, according to these reports, still believes the Saudis can be persuaded to moved on the issue. Among the gestures being discussed are opening trade offices, direct economic links, public cultural and educational ties, as well as overfly rights for Israeli airlines. Deputy Foreign Minister Danny Ayalon said Thursday on Israel Radio that Israel could not be expected to take immediate steps such as a settlement freeze "when the other side isn't prepared to make a small step." Ayalon echoed what Defense Minister Ehud Barak had been saying in recent days, that any move on settlements needed to be seen as part of a wider regional picture. He also said, in regards to calls for a freeze for natural growth construction, that Israel "cannot strangle 300,000 residents." Ron Dermer, the director of policy planning in the Prime Minister's Office, said in a wide-ranging interview that appeared in The Jerusalem Post, "I think if people want to reach an understanding, they can reach an understanding on the issue." Defense Minister Ehud Barak, who returned Wednesday from his meeting a day earlier with US envoy George Mitchell in New York, has briefed Prime Minister Binyamin Netanyahu on the talks. Netanyahu and Mitchell are expected to meet in two weeks. In the meantime, a government official said the discussions with Washington on the issue were continuing. "The policy goal at the moment is to try reaching common ground with the US, which is where the effort is being placed. We hope that it is successful." The official also said it was Israel's hope that if an agreement was reached, it would be endorsed by the Europeans, who have become increasingly vocal in their calls for a complete settlement freeze. German Chancellor Angela Merkel on Thursday called on Israel to end settlement construction, saying such activity jeopardized efforts toward a two-state solution. "I think it is now important to get commitments from all sides and that includes the issue of settlement building," Merkel said in a speech to the Bundestag. "I am convinced that there must be a stop to this. Otherwise we will not come to the two-state solution that is urgently needed."