Jerusalem - An Israeli-Palestinian peace deal that would also settle the disputed status of Jerusalem was unlikely to be signed by the year's end, Prime Minister Ehud Olmert said Monday, but added that gaps on other key issues were bridgeable.

"I do not believe we can reach understandings this year which will include the subject of Jerusalem," he told a parliamentary committee dealing with foreign affairs and security.

"As regards the other core issues - the gaps are not dramatic," the Ynet news site quoted him as saying.

The gap regarding the borders between Israel and a future Palestinian state "was also bridgeable," he said, and added that even the highly-loaded issue of the future of Palestinian refugees and their descendents - considered one of the deal-breakers in any attempt to reach an Israeli-Palestinian peace treaty - could be solved in a satisfactory way to Israel.

Olmert and Palestinian President Mahmoud Abbas pledged at last November's Annapolis peace summit to try and forge a deal by the end of 2008, and peace talks between the sides resumed - after a seven- year hiatus - around the turn of the year.

The negotiations are being held amid a virtual media blackout, and with conflicting reports on the progress being made.

The future of Israeli-occupied East Jerusalem is considered one of the most intractable of the core issues being discussed, and a potential deal-breaker, given that it also includes the flashpoint Temple Mount/Haram al-Sharif compound, holy to both Jews and Muslims.

Palestinians want East Jerusalem as the capital of their future state, but Israel, which captured it 1967 war, and annexed it shortly afterwards, says a united Jerusalem is its eternal capital.

However, according to some reports, Israel is prepared to cede the Muslim neighbourhoods of the city to Palestinian sovereignty, but insists on retaining the Jewish neighbourhoods built after the 1967 war. (dpa)