Israeli Prime Minister Ehud Olmert said after peace talks in Washington that failure to negotiate a two-state solution with the Palestinians could threaten Israel's long-term survival.

A day after Israel and the Palestinians formally relaunched negotiations, Olmert's comments appeared in Thursday's Haaretz newspaper on the 60th anniversary of the passing of a U.N. resolution to partition British-run Palestine between Jews and Arabs -- a two-state solution that still eludes them.

"If the day comes when the two-state solution collapses, and we face a South African-style struggle for equal voting rights ... then, as soon as that happens, the state of Israel is finished," Olmert said.

For 40 years, Israel has occupied the West Bank and Gaza Strip, home to 4 million Arabs. However, to annex the territory and its people would, Israeli leaders say, undermine the Jewish nature of Israel, which has a population now of 7 million.

Olmert and Palestinian President Mahmoud Abbas agreed at a conference hosted by U.S. President George W. Bush this week to try to forge a peace treaty and create a Palestinian state by the end of 2008 -- a time scale skeptics say is too ambitious.

Both leaders are weak.

Olmert got a boost on Thursday when police ruled out pressing corruption charges over his role in the sale of a state-owned bank. But he is embroiled in other graft scandals and faces resistance to concessions from within his coalition.

Abbas is locked in a power struggle with Hamas Islamists who control Gaza -- which he wants for a future state -- and have vowed to undermine peace talks.

The Israeli and Palestinian public are also skeptical. A poll in Israel's top-selling daily showed 83 percent of Israeli respondents did not expect a peace deal within a year, while many Palestinians doubt Abbas will protect their interests.

In a reminder of the violence that has plagued the region for decades, Israel killed four Hamas fighters in two air strikes in the south of the Gaza Strip on Thursday, Hamas officials and Palestinian medical staff said.

"ZIONIST CRIME"

Hamas's armed wing condemned a commitment by Abbas to Israel to crack down on militants, saying "all options remain open to respond to any expected Zionist crime." A Hamas statement to mark the partition resolution anniversary said there was "no place for Jews" in the land that was once British-run Palestine.

Olmert said Israel, which believes Arabs would in time outnumber Jews if it incorporated the land captured in the 1967 Middle East war, had little choice about peace if it wanted to survive as a Jewish state while safeguarding democracy.

If Israel failed to agree to a two-state solution and tried to absorb Palestinians without giving them equal voting rights, influential U.S. Jewish organizations "will be the first to come out against us," Olmert said.

Bush, whose reputation in the region has been badly damaged by the Iraq war, has faced criticism for not acting sooner to resolve one of the Middle East's most intractable conflicts.

Olmert dismissed charges his peace push was designed to boost approval ratings hit by a series of so far inconclusive graft allegations and last year's unpopular war in Lebanon.

Israeli police said on Thursday there was insufficient evidence against Olmert for them to recommend corruption charges over the sale of a state-owned bank. He is still the subject of other investigations into possible corruption, as well as of a public inquiry into his role in the Lebanon war.

Negotiators will meet again on December 12 in Jerusalem.