Efforts to convene a rare Israeli-Palestinian summit have broken down.  The thorny issue of the release of Palestinian prisoners is at the heart of the dispute.

Israeli Prime Minister Ehud Olmert says plans for his first summit meeting with moderate Palestinian President Mahmoud Abbas are on hold. Mr. Olmert told Cabinet ministers from his ruling Kadima party that Mr. Abbas demanded the release of Palestinian prisoners as a condition for the meeting.

Israeli government spokeswoman Miri Eisen says that is unacceptable.

"There cannot be preconditions," she said.

Mr. Olmert said there would be no prisoner release, until the Palestinians free a kidnapped soldier held in the Gaza Strip.

Gunmen from the ruling Islamic militant group Hamas seized 19-year-old corporal Gilad Shalit in a cross-border raid on an Israeli army base in June. The Hamas-led government is demanding the release of hundreds of Palestinian prisoners in exchange for the captive soldier.

But Eisen says Israel will not cave in to what she calls "terrorist blackmail."

"We say we will not now release prisoners, because Corporal Shalit was abducted, and we can't release any of these prisoners right now," added Eisen.

With about 10,000 Palestinians in Israeli jails, the issue of freeing the prisoners is a popular cause on the streets of the West Bank and Gaza. Palestinian analyst Bassam Eid says Mr. Abbas, also known as Abu Mazen, has been ineffective, and he needs to show his people the tangible benefits of talking peace.

"Mr. Abu Mazen already gave so many promises, which unfortunately Mr. Abu Mazen himself did nothing right now," noted Eid.

Mr. Abbas, who heads the Fatah party, is locked in a power struggle with the rival Hamas, a group that seeks Israel's destruction. Israel says it wants to strengthen Mr. Abbas, but it fears a prisoner release will have the opposite effect. Israeli officials say it would show the Palestinians that terrorism pays, and strengthen the militants of Hamas.