Prime Minister Ehud Olmert says it is possible to advance significantly the resolution of the issue of borders in negotiations between Israel and the Palestinian Authority, in spite of a shared concern by officials of both sides, and the United States, as to their ability to realistically achieve a detailed agreement by the end of 2008.

The prime minister is convinced that the question of borders is the simplest of the three "core issues" in the Israeli-Palestinian conflict - the other two being refugees and Jerusalem - and said that sufficient preparatory work had been done for progress to be achieved.

"If we do not want to run straight into an impasse, it is best to begin negotiating over other issues [not Jerusalem and the refugees] like borders," Olmert told reporters in Berlin after completing a three-day official visit to Germany.

"On this issue there is a set of previous understandings and international backing, such as the letter of President Bush which mentioned concentrations of population. All this offers a direction to the resolution of the issue of borders," Olmert added.

Next week Olmert will meet with Palestinian Authority President Mahmoud Abbas, as part of their routine meetings overseeing the negotiations.

Olmert also told reporters that there is an agreement with the Palestinians to delay talks on Jerusalem until the end of the negotiations.

To date it had only been clear that this was a view held by Israel and the U.S. alone.

"The matter of Jerusalem is not first but last in terms of the order in which the core issues will be discussed and there is agreement by all parties involved in the negotiations," the prime minister said.

According to Olmert there are no delays in the talks between Israel and the PA.

"There are regular talks between [Palestinian negotiator] Abu Ala [Ahmed Qureia] and other parties, and this is necessary," Olmert said. "I hear that there are expressions of satisfaction at the seriousness with which the talks are progressing," he added.

But officials in Israel, the Palestinian Authority and the U.S. seem to agree that a detailed peace agreement is unlikely this year because of the difficulties on the ground and the slow pace of negotiations.

A senior source in Washington told Haaretz Monday that efforts to coordinate expectations had begun, but there had been no change of heart on the ultimate goal of the process.

Among the obstacles slowing negotiations are the constant barrages of Qassam rockets on Israel, the Palestinians' breach of the border wall at Rafah last month and the subsequent chaos there, as well as the recent suicide bombing in Dimona.

Vice Premier Haim Ramon said Tuesday that the talks with the Palestinians aimed for an agreement of principles and not necessarily a detailed deal by the end of the year.

"No one expects a detailed agreement by January 1, 2009," he said.

Olmert echoed his political ally Tuesday, saying that "from the very onset, there was no commitment on the part of Israel and the Palestinians to reach an agreement during 2008, instead there was talk about making effort, and this is still being done."

Still, Olmert insisted that "there is no wish or desire to leave the completion of the negotiations to a new American president."

President George Bush's second term in office ends on January 20, 2009.

"I don't see any Israeli interest in delaying the negotiations and I have not heard any arguments calling for delaying by a year because this would perhaps improve conditions," Olmert added.

However, PA Prime Minister Salam Fayyad, who visited Washington for meetings that included Secretary of State Condoleezza Rice, warned Monday that it was time to demonstrate progress in the talks.

"Unless there is tangible progress in the period immediately ahead" on a list of pledges made by Israel, "I think, honestly, it would require that we begin to really call this for what it is," Fayyad said.

Fayyad said that his role was to ensure that the diplomatic negotiations were carried out in parallel with progress in implementing the road map.

The Palestinian prime minister said that Israel was far from implementing its part in the road map and complained of continued settlement activity, "mostly around Jerusalem." He also said that not enough road blocks had been lifted in the West Bank.

But Foreign Minister Tzipi Livni, who heads Israel's negotiating team, warned Sunday that it would be impossible to reach an agreement as long as Hamas militants control the Gaza Strip.

"There is no hope for any kind of peace or the vision of the Palestinian state which includes the Gaza Strip without real change on the ground," Livni told The Associated Press.

"Annapolis took place in November. We are now in February 2008," Fayyad said. "We need to begin to see progress, most certainly, in the hope that we are going to be able to reach agreement in 2008, and I hope that will be possible."

Merkel backs Israel on Gaza

The situation in the Gaza Strip and the continued rocket attacks against Israeli communities was one of the issues Olmert discussed with Chancellor Angela Merkel during his visit to Germany.

At a press conference following their meeting, Merkel backed Israel's response to the Hamas rocket attacks and said that "the solution to the suffering of the residents of Gaza is an end to the rocket attacks."

Merkel justified Israel's military operations in the Strip and said that "I think that the fact that there is terrorism originating from Gaza raises questions about how to respond and how to prevent Hamas from carrying this out. The humanitarian situation in Gaza is difficult and we are trying to help as much as possible but first the shooting against Israeli towns must stop."