Israel and the Palestinians have yet to reach a compromise on settlement construction, but Jerusalem is nonetheless considering a number of gestures, including releasing prisoners and transferring areas in the West Bank to Palestinian control, western officials familiar with peace talks told Ynet Tuesday night.

The second round of direct negotiations began in Sharm el-Sheikh, Egypt on Tuesday and will continue Wednesday when Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas will meet in Jerusalem.

American Pressure

The two leaders may also attend another summit in New York later this month.

According to officials who took part in the talks, the Israeli negotiation team suggested holding one of the meetings between Netanyahu and Abbas in Ramallah, as a goodwill gesture to the Palestinians. It remains unclear whether the Israeli security establishment will approve such a meeting or suggest it be held in Jericho instead.

According to the western officials, no progress was made during the Sharm summit on the settlement construction issue. The construction moratorium is set to expire on September 28, but the US is pressing Israel to extend it.

The talks focused on finding a solution that maintain the stability of Netanyahu's government without causing the Palestinians to quit the talks.

Despite the difficulties, Israel is considering a number of gestures to the Palestinians, including the release of prisoners, transferring certain areas in the West Bank to full Palestinian control and continuing the construction freeze in areas outside the main settlement blocs.

The sources said the Israeli negotiators mentioned the possibility of extending the moratorium.

During the talks in Sharm, the American delegation, headed by Secretary of State Hillary Clinton, reprimanded the Israelis and Palestinians, and called on both sides to project optimism and not create a negative atmosphere.

US envoy George Mitchell told reporters in Egypt, "President Abbas and Prime Minister Netanyahu continue to agree that these negotiations, whose goal is to resolve all core issues, can be completed in one year."

Echoing US President Barack Obama's position, Mitchell said, "We think it makes sense to extend the (construction) moratorium, especially given that the talks are moving in a constructive direction."