OLMERT

SDE BOKER, Israel (Reuters):

Israel is ready to release many jailed Palestinians in return for a soldier seized by militants in June, Israeli Prime Minister Ehud Olmert announced yesterday, saying he was reaching out for peace.

In a major policy speech, Olmert offered to ease travel restrictions on Palestinians and free up frozen funds if violence against Israel ended. He repeated his readiness to give up some occupied land for an eventual peace agreement.

"We are ready and willing to pursue this path, and persevere until we reach the sought-after solution," Olmert said.

Rocket attack

Within hours of Olmert's address, Palestinian militants in Gaza fired rockets into the Israeli border town of Sderot, despite a ceasefire declared on Sunday. Nobody was hurt.

Al-Aqsa Martyrs Brigades, part of Palestinian President Mahmoud Abbas's Fatah faction, claimed responsibility for the attack, which followed the killing of two Palestinians in an Israeli raid in the West Bank, where a truce is not in effect.

"In response to the Prime Minister extending his hand in peace, we see what some Palestinian factions are giving in return," Olmert spokeswoman Miri Eisin said.

Apart from a few salvoes just after the ceasefire began on Sunday, militants have largely refrained from firing rockets.

Both Olmert and Abbas are under growing United States pressure to show progress on ending decades of conflict. Sudden new talk of peacemaking comes days before visits to the region by President George W. Bush and U.S. Secretary of State Condoleezza Rice.

If the truce lasts, it could ease domestic pressure on Olmert after an inconclusive war with Hezbollah guerrillas.

In his speech, Olmert repeated that he was willing to dismantle many settlements Israel has built in the West Bank, which it captured in the 1967 war, to get "real peace".

Olmert did not give details or mention a unilateral "realignment plan" shelved after the recent Lebanon war.