Israeli Prime Minister Benjamin Netanyahu is prepared to base talks for a Palestinian state on the 1967 truce lines in what appears to be a major policy retreat, an Israeli television channel has claimed.

It is the first time that the right-wing premier has publicly defined the borders as a starting point for talks, and brings him in line with US policy that broadly calls for talks based on ceding the West Bank to the Palestinians with agreed land swaps.

Earlier this year, Mr Netanyahu provoked a major rift with the US, Israel's closest ally, when he angrily rejected President Barack Obama's call for talks based on the pre-1967 lines, retorting that the armistice lines were "indefensible".

A government official tentatively confirmed the Channel 2 report, saying that Mr Netanyahu was willing to restart talks based on a US proposal, but cautioned that there were conditions attached to the offer.

The Palestinians would be expected in return to drop their statehood bid at the United Nations scheduled for September, and recognise Israel as a Jewish state. The Palestinians have repeatedly rejected the latter condition, saying that to do so would prevent the return of refugees and threaten the rights of the Arab minority living in Israel.

The Palestinians said they had not received an offer from Israel.

The caveats raise questions over whether the offer to restart negotiations is serious. An Israeli newspaper reported yesterday that President Shimon Peres cancelled a secret meeting with his Palestinian counterpart, Mahmoud Abbas, aimed at reviving talks after receiving word that Mr Netanyahu opposed the meeting.

Washington-brokered peace talks collapsed last September after Israel refused to halt settlement expansion in the occupied West Bank, land which the Palestinians want for their future state. The international community regards the 1967 ceasefire lines as a border, while Israel has argued it is only temporary, even though Israeli governments have used it as a basis for talks.

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