Israeli President Shimon Peres told Egyptian President Hosni Mubarak the Jewish state has no desire to increase settlement activity, and it accepts a two-state solution with the Palestinians.  After the Cairo meeting, President Mubarak said tough decisions need to be made, but sounded optimistic about the chances for peace.

Israeli President Shimon Peres's visit to Cairo followed a lengthy freeze in Arab-Israeli peace talks.

Egypt's Pres. Hosni Mubarak (R) and Israel's Pres. Shimon Peres shake hands after a press conference in Cairo, 07 Jul 2009

Egyptian President Hosni Mubarak told a news conference, after meeting Mr. Peres, that the peace process "cannot bear another failure" and the Israeli government must show the "courage" and "political will to make difficult decisions."

Mr. Mubarak sounded an optimistic note, indicating that a "golden opportunity" exists for resuming stalled talks

"We have clear bases for a just and comprehensive peace," he added, pointing to the 2003 Roadmap to Peace, as well as the 2002 Arab peace plan, which offers full ties with Israel in exchange for its withdrawal from occupied Arab land.

President Mubarak also touched on one of the more thorny issues that have stalled Israeli-Palestinian talks, reaffirming that Israeli soldier Gilad Shalit, who was captured by Hamas militants in June 2006, is still alive.

"Discussions about Shalit are ongoing, and he is in good condition.  We hope that in the near future the issue of Shalit will be resolved," he said.

When asked about a future Palestinian state, Israeli President Peres sounded upbeat about a two-state solution, as was recently endorsed by Israeli Prime Minister Benjamin Netanyahu.

"The option of establishing a Palestinian state with temporary borders for a limited and brief period of time, is in the Roadmap," said Peres.  "Tthe plan was accepted by the Palestinians, by the Arabs, by [Israel], by the Americans, and by the whole world, so this is not a new proposal, and we will need to examine the options that were accepted already ...  Every issue will be examined, and there will be arguments," he said.

Mr. Peres went on to respond to a key Palestinian demand, insisting Israel has "no intention to create more settlements, or to confiscate more [Palestinian] land."

Beirut-based Senior Associate at the Carnegie Endowment for International Peace, Amr Hamzawi, said he sees positive movement from Israel towards reaching a solution to the prickly issue of (Jewish) settlements.

"Right now, there are hopes for a real new start in the negotiations between the Israelis and the Palestinians.  We have heard some positive statements from the Israeli side regarding the settlements," he said. "Peres, in fact, did say much of what we have heard in the last 48 hours from [Defense Minister Ehud] Barak, primarily saying while we are willing to consider a freeze [in settlement activity], it is still unclear what they mean by freeze, but at least they mentioned it for the first time in the last 48 hours, and now Peres has confirmed that it seems to be accepted inside the Israeli government," he said.

Hamzawi said Egypt has an important stake in getting both sides to resume negotiations and said the regional and international situation is favorable for making attempts to negotiate a deal "more than just a ritual," this time.

President Mubarak indicated he believes Mr. Netanyahu "would be pragmatic in reaching a solution ... once negotiations begin."