Ehud Olmert, the Israeli Prime Minister, has for the first time set down a timetable for peace with the Palestinians saying he wanted agreement before the end of 2008.

“There will be difficult differences of opinion and crises and arguments, but I am optimistic that if we act with caution and responsibility, there is a chance that in the end we will reach an agreement,” Mr Olmert said after talks with the Egyptian President, Hosni Mubarak, yesterday.

Though he cautioned that any agreement would take longer to put in place, and depend upon fulfilling all conditions of the 2003 “road map” for peace, it was the first time the Israeli leader has set such a clear timeline.

His statement came as the United States was reported to be preparing to issue formal invitations to a peace summit expected in Annapolis, Maryland next week.

Initial high hopes for the conference have fallen after Israeli and Palestinian negotiators failed to come up with a detailed framework for the talks. It is no longer clear which Arab nations will be represented at the talks. But Mr Mubarak, who has pledged to send Egypt's foreign minister to the summit, gave warning yesterday that Annapolis must not be viewed “as a failure”.

“The meeting is aimed at easing the difficulties. Failure would mean that the negotiation has come to the end of the road,” Mr Mubarak said at a joint press conference with Mr Olmert.

Palestinian negotiators scoffed at reports of significant progress. They have been pushing for discussion of controversial core issues including refugees, borders and the status of Jerusalem, as well as definite timelines to implement an agreement. The Israeli team sees the summit as a ceremonial relaunching of negotiations.

“I don't know from where came this rumour about the progress. There is a meeting now and we hope at the last minute we could achieve some progress. But until now, no,” said Nimer Hamad, a senior political advisor to the Palestinian Authority president, Mahmoud Abbas.

Annapolis would be the first time US officials have sponsored a major peace summit since July 2000m, when President Bill Clinton hosted the late Palestinian leader Yasser Arafat and the Israeli Prime Minister Ehud Barak at Camp David.

But in Israel and the Palestinian territories there are limited expectations of progress.

A new poll from Ramallah-based Near East Consulting suggested that while 71 per cent of those asked supported Palestinian participation in Annapolis, only 43 per cent think it will lead to progress in the peace process.

On the Israeli side, attitudes are similarly sceptical: last month's Peace Index conducted out of Tel Aviv University found 50 per cent of Jewish Israelis polled thought Annapolis would not yield a basic clarification of disputes between the two sides, and just 40 per cent thought it could significantly advance the chance of a permanent peace agreement.

Hardliners on each side are also preparing to show their opposition to the talks. An Israeli man was killed in a drive-by shooting near a northern West Bank settlement on Monday night, in an attack claimed by a violent Fatah offshoot, and Israeli security forces have been on high alert preparing for other attacks on Israeli targets ahead of the summit.

Yesterday, the former Soviet dissident and former Cabinet minister Natan Sharansky launched a campaign against any attempt to divide Jerusalem, backed by right-wing nationalist movements. Mr Olmert has indicated a willingness to cede limited parts of Arab east Jerusalem in a final peace agreement.

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