(PARIS) - Israel and the Palestinians "have never been this close" to a peace deal, Israeli Prime Minister Ehud Olmert said Sunday as the search for Middle East peace took centre stage at a Mediterranean summit.

The Paris summit also brought new impetus to the peace process between Syria and Israel, as Olmert and Syrian President Bashar al-Assad held indirect talks through Turkey.

Olmert and Arab leaders were among the more than 40 heads of state and government meeting in Paris to launch a new Union for the Mediterranean, aimed at boosting cooperation in one of the world's most volatile regions.

Though Israelis and Palestinians have met regularly since the relaunch of the peace process last November, talks have stalled over the issue of Jewish settlements on the West Bank and in East Jerusalem.

But Olmert insisted following a meeting with Palestinian leader Mahmud Abbas, hosted by French President Nicolas Sarkozy, that the two sides "have never been as close to an accord as we are today."

According to a source close to the prime minister, Olmert promised Abbas to release a new group of Palestinian prisoners as "a gesture" of good will.

Olmert's upbeat declarations came against the backdrop of political troubles at home, where he is facing calls to resign after being questioned for a third time over graft allegations.

Israeli media Sunday predicted his days in office were numbered, but Olmert's entourage in Paris insisted the troubles did not undermine his authority to speak in Israel's name.

Olmert held talks in Paris with Turkish Prime Minister Recep Tayyip Erdogan, who then met Assad, according to an Israeli diplomatic source.

After meeting with Assad, Erdogan earlier said he held out much hope of a breakthrough toward face-to-face peace negotiations between Syria and Israel.

"Our hopes are very high. Our determination is solid and we will continue," Erdogan told reporters. "This requires caution."

Both Olmert and Abbas called on Sarkozy, as president of France, holder of the European Union presidency and host of the new Mediterranean union, to take a front-seat role in steering peace negotiations.

Abbas said that Sarkozy's "friendship" with both Israelis and Palestinians would enable him "to play an important role to help the peace process succeed in a few months."

The French leader, who led a diplomatic drive to bring friends and foes around the same table, said the union between Europe and its Mediterranean neighbours would help countries in the region "learn to love each other".

He thanked Arab states for "making a gesture of peace" by attending despite historic tensions with Israel, while Egyptian President Hosni Mubarak urged Israelis and Palestinians to step up their drive for peace.

The summit marked a return to the diplomatic fold for Assad after years of isolation, and gave a boost to peace talks between Syria and Israel, technically at war since the creation of the Jewish state in 1948.

On a third diplomatic front, Sarkozy Saturday hosted landmark talks between Assad and Lebanon's President Michel Sleiman, whose election in May ended a drawn-out political crisis in Lebanon.

Both countries afterwards announced their decision to establish diplomatic relations, a first since their independence from colonial rule.

Syria, the former power broker in Lebanon, withdrew its troops in 2005 in the aftermath of the killing of Lebanese ex-premier Rafiq Hariri, for which it was widely blamed. Damascus denies involvement.

While Washington continues to blacklist Syria as a state sponsor of terrorism, France has moved to bring Assad out of the diplomatic cold, renewing ties broken off after the murder of Hariri, who was a personal friend of Sarkozy's predecessor Jacques Chirac.

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