By Aluf Benn, Avi Issacharoff and Yoav Stern, Haaretz Correspondents, and Agencies
The leaders concluded two-hour talks at the Prime Minister's Residence in Jerusalem on Saturday evening.
Chief Palestinian Liberation Organization negotiator Saeb Erekat confirmed during a press conference Saturday evening in Ramallah that Israel has agreed transfer the funds for humanitarian purposes. Erekat said the two sides also agreed that NIS 35 million would be transferred to hospitals in East Jerusalem.
The meeting is a "first step toward rebuilding mutual trust and fruitful cooperation," Olmert's office said in a statement. More meetings are planned, said Erekat.
Speaking at a news conference, Erekat said the leaders had also committed themselves to reviving a meaningful peace process.
The funds transfer will not occur immediately, but rather will be dependent on the establishment of a mechanism to ensure the money is used for the purposes intended by Abbas, and does not end up in the hands of the ruling Islamic militant group Hamas, currently in a violent power struggle with the PA chairman's Fatah movement.
Olmert also agreed to remove several West Bank checkpoints, and reexamine security procedures at the Karni commercial crossing between Israel and the Gaza Strip, in order to facilitate to movement of goods into Gaza.
In addition, Olmert promised to meet a quota of 400 trucks moving through the main cargo crossing between Gaza and Israel.
The two leaders failed to reach agreement on a key issue - a prisoner swap involving abducted Israel Defense Forces soldier Gilad Shalit - but decided to set up a committee to study it further. Olmert emphasized during the meeting that no Palestinian prisoners held in Israeli jails will be freed prior to the release of Shalit, held since June 25.
According to Erekat, Abbas asked Olmert to release members of the Palestinian Legislative Council from Hamas arrested by Israel, as well as renew a past agreement not to pursue wanted militants.
Israel has also agreed in principle to allow Egypt to provide Abbas' security forces with weapons as well as allow the PLO's Badr Brigade to enter the territories. The brigade is currently stationed in Jordan.
Olmert also warned Abbas that given the continued Qassam rocket fire from Gaza despite a cease-fire in the area, it will be difficult for Israel to maintain its policy of restraint. Responding to a request by the Palestinian delegation to extend the cease-fire to the West Bank, Olmert said the Palestinians must first demonstrate an ability to uphold the truce in Gaza.
Abbas and Olmert met informally on the sidelines of a conference in Jordan earlier this year, but the PA chairman's last formal meeting with an Israeli prime minister was in February 2005, when Ariel Sharon held the post.
Olmert emerged from his official residence in Jerusalem to greet Abbas. The two shook hands and also kissed each other on the cheek. Abbas was then introduced to Olmert's wife Aliza, an artist known for her dovish views.
The two leaders took seats opposite one another at a long table, set for a meal and covered by white cloth. Israeli and Palestinian flags served as table decorations.
The meeting comes a month after Olmert said in a speech at a memorial ceremony for David Ben-Gurion last month that he would "invite Abu Mazen [Abbas] to meet with me immediately, in order to conduct a real, open, genuine and serious dialogue between us."