Housing and Construction Minister Meir Sheetrit on Wednesday called on the government to negotiate first with Saudi Arabia and other moderate states and afterwards to speak with the Palestinians. "Israel and the Palestinians are in a stalemate. There is nowhere to move. We are deadlocked," said Sheetrit. He spoke during a panel discussion held in Tel Aviv, which was sponsored by the Geneva Initiative. "Hamas does not recognize Israel. It is very difficult to have a peace agreement with people who want to eradicate the state," Sheetrit said. "It is impossible to see them [Hamas] as a partner," he added. The moderate forces within the Palestinian Authority, which do recognize Israel, are very weak, Sheetrit said. The PA itself is divided such that there is no clear authority, he added. In light of this he renewed his call, which he has made since 2002, to negotiate with Saudi Arabia and other moderate states on the basis of the proposal the Arab League made in that year to recognize Israel if it withdrew to the pre-1967 border. Sheetrit said that he clearly does not accept all aspects of that proposal, but added that it was at least a basis for negotiations. That's particularly true today when the moderate Arab states believe that peace with Israel would help isolate Iran and stem the rising tide of extremism, Sheetrit said. Even the Saudi Arabia, which initiated the Arab League proposal, "accepts that we will not go back to the [pre-]1967 borders," Sheetrit said. At this juncture, the discussion should be about a comprehensive permanent agreement, Sheetrit said. "There is no point in any more interim agreement. There is no point in any more unilateral steps or convergence," Sheetrit said. He did specify what the agreement he was referencing would include. Sheetrit said that once it was approved by the moderate Arab states, the Palestinians would endorse it as well. Panel member and former PA Fatah cabinet member, Kadoura Fares, disagreed with Sheetrit. He said that the unity government formed in Mecca last week strengthened the position of Palestinian Authority President Mahmoud Abbas and made him a better negotiating partner for Israel. Fares argued that Hamas' decision to abide by past agreements with Israel, could be interpreted as acceptance of the state, even if it did not formally recognize it. Included in those agreements, which Hamas has accepted, is one that speaks of a Palestinian state within the pre-1967 borders, said Fares. He said that during a recent meeting in Damascus, Hamas leader Khaled Mashal tol dhim that he had given Abbas a mandate to negotiate wtih Israel on condition that he hold fast to two principles. The first is the creation of a Palestinian state along the pre-1967 border and the second is the return of Palestinian refugees to their homes along the lines of the United Nations Resolution 194. Fares said he hoped that something substantive would come out of the meeting scheduled next week between Israeli Prime Minister Ehud Olmert, Abbas and United States Secretary of State Condoleezza Rice. On a separate note, upon a query from the audience, Fares said that the Israeli soldier Gilad Shalit who was kidnapped by Hamas on June 25, 2006, was alive and well. Although he added that he had not seen him personally. Fares also attacked Israel's continued settlement activity, asked that prisoners be released and that road blocs be dismantled. He called on Israel to dismantle the road blocs in the territories, which he said were an intimidation measure. Sheetrit in turn, said that Israel was not supporting and financing new settlements, he added that, "nothing illegal is being done." Fares responded by stating that the issue was now was the expansion of existing settlements. Labor MK Colette Avital and Meretz Party Chairman Yossi Beilin also spoke at the event.