Israel should withdraw from nearly all territory captured in the 1967 Middle East war in return for peace with the Palestinians and Syria, Prime Minister Ehud Olmert was quoted on Monday as telling a newspaper.

Olmert, in a caretaker role since quitting on September 21, said he was breaking new ground in calling for a broad pullback from the occupied West Bank, where Palestinians hope to establish a state, and in the annexed Golan Heights, which Syria wants back.

"(I am saying) what no previous Israeli leader has ever said: we should withdraw from almost all of the territories, including in East Jerusalem and in the Golan Heights," Olmert, who resigned over corruption allegations, told Yedioth Ahronoth.

The Israeli daily called it a "legacy interview", published on the eve of the Jewish new year, in which Olmert went further in making offers for peace than he ever did publicly when he was in active office, with greater power to see them carried out.

According to Western and Palestinian officials, Olmert has proposed in peace talks with the Palestinians an Israeli withdrawal from some 93 percent of the occupied West Bank, plus all of the Gaza Strip, from which Israel pulled out in 2005.

Olmert has said repeatedly that Israel intends to keep major Jewish settlement blocs in the West Bank in any future peace deal with the Palestinians.

A peace agreement, Olmert has said, would mean Israel would have to compensate the Palestinians for the land it hopes to retain by "close to a 1-to-1 ratio".

In exchange for the settlement enclaves, Olmert has proposed about a 5 percent land swap giving the Palestinians a desert territory adjacent to the Gaza Strip, as well as land on which to build a transit corridor between Gaza and the West Bank.

The negotiations, which Olmert has vowed to continue until he leaves office when a new government is formed, have shown few signs of progress and both sides acknowledge chances are slim of meeting Washington's target of a deal by the end of the year.

Palestinian chief negotiator Ahmed Qurie, speaking to Reuters before the Olmert interview appeared, said annexation of settlement blocs would prevent the Palestinians from establishing a viable and contiguous country.

 "We can't have a state with settlements dividing the land," Qurie said.

Another senior Palestinian negotiator said tracts Olmert  proposed to exchange in a peace deal "are lands we don't want".

Olmert has also engaged Syria in indirect negotiations with Turkish mediation.

"I'd like to see if there is one serious person in the State of Israel who believes it is possible to make peace with the Syrians without eventually giving up the Golan Heights," Olmert said in the newspaper interview.

He has so far put off talks on sharing Jerusalem and ruled out a so-called "right of return" for Palestinian refugees, a central Palestinian demand. On both issues, there is strong opposition in Israel to significant concessions.

Olmert, who could face criminal indictment in a corruption investigation, will remain prime minister until a new government is approved by parliament.

A week ago, Israel's president asked Foreign Minister Tzipi Livni, now leader of Olmert's centrist Kadima party, to try to put together a governing coalition within six weeks. Failure to do so would likely lead to a parliamentary election. - Reuters