Vice Prime Minister Silvan Shalom met with Palestinian Economic Minister Bassem Khoury in Jerusalem on Wednesday for the highest level talks between Israeli and Palestinian officials in half a year.

The meeting was the first between an Israeli and Palestinian Authority minister since Prime Minster Benjamin Netanyahu's government took office in March. Until Wednesday, the Palestinian ministers had boycotted their Israeli counterparts.

During the talks, which were held at the King David Hotel, the ministers discussed economic proposals to improve life for the Palestinians.

The agenda included easing restrictions on the entry of Palestinian businesspeople and VIPs to Israel; boosting Israeli meat exports to the West Bank and dairy imports from the West Bank to Israel; and allowing more Palestinians to seek medical care in Israel, Israeli officials said.

Proposed joint industrial parks - an idea that has foundered in the past amid violence - were also to come up in the talks, the Israeli officials said.

Netanyahu has said he wants to make economic peace with the Palestinians, saying it could reduce the risk of violence and pave the way for more substantive talks on resolving the decades-long conflict.

Many Palestinians fear Netanyahu is using economic peace as a fig leaf to avoid reaching a political accord on Palestinian statehood. And critics on both sides have noted that both Palestinian intifadas against Israel ignited at times of unparalleled gains in the beleaguered Palestinian economy.

Khoury and Shalom shook hands before closeting themselves in a meeting room at the hotel.

"Our objective is economic peace," Shalom told reporters. "That doesn't prevent political dialogue, but rather, assists and gives it momentum."

Khoury said he looked forward to the meeting and that the objective was to improve conditions for the Palestinians.

Teams of government officials from both sides were to join them later for a broader discussion.

Economic improvement in the West Bank could boost Abbas, sharpening the contrast to the misery of the impoverished and isolated Gaza Strip, ruled by his bitter rival, the Islamic militant Hamas. Popular support for Abbas has ebbed because he had nothing to show for a year of peace talks with Netanyahu's predecessor, Ehud Olmert.

Privately, some Palestinians concede that Netanyahu has done more to improve conditions for the Palestinians during his five months in office than Olmert did in three years, despite his oft-stated commitment to reaching a peace accord.

Since Netanyahu has taken office, he has taken down some roadblocks in the West Bank, allowing for a smoother movement of goods and a consequent upswing in the West Bank's retail and entertainment sectors.

Earlier this year, the International Monetary Fund predicted that the Palestinian economy could grow by 7 percent this year, its first optimistic forecast in three years.

Israel imposed the roadblocks and other travel restrictions at the height of violence earlier this decade, saying they were needed to prevent the movement of militants.

Despite the recent gestures, significant constraints on movement in the West Bank remain, hobbling growth in industry, exports and investments. Gaza, meanwhile, remains under a tight Israeli and Egyptian blockade that is cracked open just enough to avert a humanitarian crisis.

Peace talks - held until late last year - have not resumed. The Palestinians insist that Israel first freeze settlement activities in the West Bank and east Jerusalem, areas where they hope to establish an independent state. The U.S. has similarly demanded a settlement halt but Israel has refused.

Israeli officials were to meet later Wednesday in New York with George Mitchell, President Barack Obama's Mideast envoy, to discuss the settlement issue.

In the absence of formal peace talks, Abbas aides have said he might meet with Netanyahu on the sidelines of a United Nations meeting later this month.

Officials said the agenda included proposals to ease restrictions on the entry of Palestinian businesspeople and VIPs to Israel.