By Ali Sawafta
RAMALLAH, West Bank, July 18 (Reuters) - As Palestinian leaders discussed a possible U.S-brokered resumption of peace talks on Thursday, the Israeli government denied a shift in its conditions that might help end a three-year stalemate.
President Mahmoud Abbas began briefing fellow PLO leaders in Ramallah on his meetings this week with U.S. Secretary of State John Kerry, who has extended his stay in the region and appears to be hoping for some movement toward talks.
A comment by an Israeli official that Israel had agreed to a new wording on future border negotiations was, however, denied by a spokesman for Prime Minister Benjamin Netanyahu.
Kerry has given no detail on where he believes the two sides might give ground, though he said after meeting Abbas in Jordan on Wednesday that differences had narrowed "very significantly".
A U.S. State Department official said there were currently no plans to announce a resumption of Israeli, Palestinian talks.
Making his sixth visit to the region since March, Kerry has not spelled out his proposals. But his efforts won the notable endorsement of the Arab League, which said they "provide the ground and a suitable environment to start negotiations".
Kerry has highlighted a 2002 offer made by the 22-nation League to make peace with Israel in return for a Palestinian state broadly inside borders that existed before Israel occupied the West Bank, Gaza Strip and East Jerusalem in a 1967 war.
Netanyahu's spokesman denied the account of an Israeli official, briefing anonymously, who had said the government would agree to a formula under which borders of a Palestinian state would be based on 1967 lines - a sweeping handover of the occupied West Bank, which is peppered with Jewish settlements.
The Arab League confirmed this week that it was willing to consider swapping some land on either side of the 1967 borders, bringing it closer to the Israeli position. That is that the old borders would leave Israel at too great a risk of attack and that some settlement blocs should be incorporated into Israel.
Abbas convened senior members of the umbrella Palestine Liberation Organisation (PLO) and his Fatah party in Ramallah, hub of the Israeli-occupied West Bank and seat of his U.S.-backed self-rule administration.
Mahmoud Al-Aloul, an official with Fatah, sounded a pessimistic note to reporters after initial consultations. "With the current formula, matters are not encouraging. But no decision has been made," he said.
Aloul did not elaborate but appeared to be alluding to reports Kerry's formula lacked any mention of stopping settlement construction and that they would agree to Kerry saying they would recognise Israel as Jewish state.
The Palestinians have refused to recognise Israel as a Jewish state out of concern it might undermine their demands for a "right of return" and the rights of Israel's Arab minority.
Abbas, whose peace strategy is routinely censured by his Palestinian Islamist rivals ruling the Gaza Strip, has in the past sought Arab League support to engage Israel.
It was not clear whether Wednesday's endorsement would give him enough political cover to resume direct talks.
"We are expecting to hear from the president the ideas presented by Kerry," senior PLO official Wasel Abu Yousef told Reuters before Thursday's meetings began. "There will be a discussion on these ideas, and everyone will say what he thinks about this.
"The conclusion will be by a general consensus."
Netanyahu's rightist coalition government, which includes pro-settler parties, says it is ready to resume peacemaking immediately and "without preconditions".
Negotiations, which have ebbed and flowed for two decades, last broke down in late 2010, after a partial settlement halt meant to foster talks ended and Netanyahu refused to extend it.
Palestinians familiar with Abbas's thinking speculated he might now forgo the demand for a settlement moratorium given a recent slowdown in housing starts issued by Israel's government, though it may still be painful to roll back his previous demand.
If Abbas yields on the issue, it may be in exchange for a goodwill gesture from Israel such as amnesty for around 100 veteran PLO fighters long held in its jails.
Israel gave no sign such prisoner releases were in the offing, but major Israeli broadcaster Army Radio said some West Bank roadblocks could be dismantled to ease Palestinian travel.
Shimon Peres, Israel's dovish president, was optimistic about Kerry's mission.
"The latest news I have is that the secretary really made real progress and the chances for an understanding heightened. And this day, tomorrow and another day are very crucial. It's touch and go," Peres told foreign correspondents.
Israel has long insisted it would keep swathes of West Bank settlements under any eventual peace accord.
Most world powers deem the settlements illegal and the European Union (EU) announced a plan on Tuesday to bar financial assistance to Israeli organisations operating in the occupied territories.
An Israeli official said Netanyahu has "attacked" the EU plan in conversations with European leaders where he argued that other "burning issues" like the Syrian civil war and disputed Iranian nuclear programme should take precedence.
Israel granted initial approval on Wednesday for new homes in Modiin Ilit, a West Bank settlement near Jerusalem and part of the territorial blocs it wants to annex eventually.
Kerry was upbeat. "We have been able to narrow these gaps very significantly," he told reporters on Wednesday. "And so we continue to get closer and I continue to remain hopeful that the sides can soon be able to come and sit at the same table." (Additional reporting by Arshad Mohammed in Amman, Noah Browning in Cairo and Allyn Fisher-Ilan in Jerusalem; Writing by Dan Williams; Editing by Alastair Macdonald and Philippa Fletcher)