Israel and the Palestinians have never been as close to peace as they are now, Israeli Prime Minister Ehud Olmert said on Sunday during a French-hosted regional conference.

"It seems to me that we have never been as close to the possibility of reaching an accord as we are today," Olmert told reporters standing alongside Palestinian President Mahmoud Abbas and French President Nicolas Sarkozy.

Olmert and Abbas launched US-sponsored peace negotiations last year with the stated aim of achieving an agreement before President George W Bush steps down next January. But progress has been stymied by violence and mutual recrimination.

Sarkozy, whose country recently assumed the rotating presidency of the European Union, visited Israel and the occupied West Bank last month as part of efforts to facilitate the negotiations.

Abbas welcomed the French intercession and voiced hope "that we can arrive at peace within a number of months". The Israeli and Palestinian leaders are among delegates at a summit of Mediterranean nations in Paris. Also attending is Syrian President Bashar Assad, who has been holding indirect, Turkish-mediated peace talks with Israel.

Olmert said he would like to see direct engagement with the Syrians but that this would not be at the cost of the Palestinian track, "which is of utmost importance to us".

The Israeli prime minister's visit to has been overshadowed by allegations back home of fraud over his travel expenses. He has denied wrongdoing. Underlining the importance given to the growing scandal, Israel radio broke away from live coverage of his comments in Paris to interview a legislator from his main coalition partner about the latest suspicions. - Reuters