Israeli President Shimon Peres will discuss an Arab proposal for comprehensive Mideast peace when he meets with Egypt's leader this week, Peres' office said Wednesday.

Peres has been promoting the Saudi initiative recently because Israel's separate peace talks with Syria and the Palestinians appear to be making little progress.

Peres spokeswoman Ayelet Frisch confirmed the Arab peace plan would "come up" when he meets President Hosni Mubarak in Egypt on Thursday.

Saudi Arabia first proposed the peace initiative in 2002. It offers pan-Arab recognition of Israel in exchange for Israel's withdrawal from Arab lands captured in 1967. The 22-member Arab League has since endorsed the plan.

There was no immediate comment from Egypt or the Arab League on Peres' intention.

Earlier this week, Defense Minister Ehud Barak endorsed the idea as a "basis for a discussion on overall regional peace." Peres and Barak have discussed the issue with Prime Minister-designate Tzipi Livni. Her office has refused to comment.

Israel's outgoing prime minister, Ehud Olmert, has welcomed the Saudi plan, but he and other leaders want to keep small parts of the territories captured in 1967.

Israel also objects to language that appears to endorse a large-scale return of Palestinian refugees to lands inside Israel. Israel says a massive influx of Palestinians would destroy the country's Jewish character.

Peres, Israel's ceremonial president, first proposed putting Israel's various peace talks on one track last month at the United Nations, calling on Saudi King Abdullah to "further his initiative." He has since been pushing the idea in meetings with Israeli, Arab and Western officials, his office said.

While Peres has no formal role in Israeli foreign policy, he is a Nobel peace laureate and well respected in the international community.

Peres and Mubarak are to meet Thursday in the Red Sea resort of Sharm El-Sheik. Peres' office said talks would also focus on the fate of a kidnapped Israeli soldier held in the Gaza Strip and the global financial crisis.

Egypt has been brokering a potential prisoner exchange between Israel and Gaza's Hamas leaders. Hamas is holding an Israeli soldier captured more than two years ago in a cross-border raid from Gaza into southern Israel.

Meanwhile, Hamas said Wednesday an Egyptian plan seeking to reconcile rival Palestinian factions needs to be modified if it is to be the basis for talks with Fatah.

Fatah and Hamas have been at odds since the latter's violent takeover of the Gaza Strip in June 2007, further complicating efforts to negotiate a peace agreement with Israel.

Speaking to reporters after a meeting of leaders of eight Syria-based radical Palestinian factions, exiled Hamas leader Khaled Mashaal declined to say what modifications were needed.

"We have remarks on the Egyptian document. We will hand them to the Egyptians to modify them in order for them to become a suitable basis for reconciliation," he said.

The Palestinian infighting coupled with the conflict with Israel has devastated the Palestinian economy. On Wednesday, the American consul said the U.S. has has transferred $150 million to the Fatah-led government in the West Bank, exceeding its original pledge of aid.

A statement from the U.S. Consulate in Jerusalem says American aid to the Palestinians in 2008 now totals over $700 million and exceeds the amount the U.S. pledged at a donors conference in December 2007.