Jerusalem ? Israel agreed Saturday to release $100 million in frozen funds to Palestinian President Mahmoud Abbas and ease West Bank travel restrictions – goodwill gestures that revived hopes for a resumption of peace talks after years of hostility and distrust.

Prime Minister Ehud Olmert made the promises in a two-hour meeting with Abbas at the Israeli leader’s official residence. It was the first Israeli-Palestinian summit in 22 months and came as both men face political problems at home that could be eased by a peace breakthrough.

The meeting is a “first step toward rebuilding mutual trust and fruitful cooperation,” Olmert’s office said. Palestinian officials praised the warm atmosphere and said more meetings were planned.

Olmert and Abbas failed to agree on a key issue – a prisoner swap – but decided to set up a committee to study it further.

The issue is not fully in Abbas’ hands. Olmert has said he will not free Palestinians without the release of an Israeli soldier being held by militants allied with the Islamic group Hamas, which controls the Palestinian government and is a rival of Abbas’ Fatah party.

Cordial meeting

Olmert set a cordial atmosphere at the start of the meeting. He emerged from his residence to greet Abbas, shaking hands and kissing the Palestinian leader on both cheeks. Abbas was then introduced to Olmert’s wife, Aliza, an artist known for her dovish views.

During their talks, the two leaders took seats opposite one another at a long table, set for a meal and covered by white cloth. Israeli and Palestinian flags served as table decorations.

Olmert’s office issued a statement saying both men agreed to cooperate as “real partners” and described the meeting’s atmosphere as friendly.

“Both leaders agreed that this meeting was the first step toward rebuilding mutual trust and fruitful cooperation,” the statement said.

Palestinian negotiator Saeb Erekat, who participated in the talks, said the two leaders agreed to hold more meetings, but did not set a date.

Israeli Prime Minister Ehud Olmert, right, walks with Palestinian Authority President Mahmoud Abbas, also known as Abu Mazen, prior to a meeting at Olmert's official residence in Jerusalem on Saturday. Olmert and Abbas were in a long-overdue summit Saturday, reviving hopes that peace talks can resume after years of fighting, hostility and distrust.

Releasing funds

Erekat and Olmert spokeswoman Miri Eisin said the Israeli leader agreed to transfer $100 million in frozen tax rebates and other Palestinian funds to Abbas’ control, giving the Palestinian leader an important achievement.

The Palestinian economy has suffered from the cutoff of funds, along with a Western aid freeze, which began after Hamas took control of the Palestinian government after winning legislative elections early in the year.

Eisin said Israel plans to transfer the money soon, but that it wants to make sure the funds do not reach Hamas, which has refused Western demands to recognize Israel and end violence.

In addition, Israel will transfer about $7.25 million to Palestinian-run hospitals in Jerusalem, Erekat said.

Getting control of the money will allow Abbas’ office to increasingly take on the role of a shadow government in the Palestinian territories, where the international boycott of Hamas has made it difficult to pay the salaries of 165,000 Palestinian civil servants.

Travel restrictions eased

Israel also agreed to remove several roadblocks in the West Bank to make travel easier, Erekat said. Olmert also promised to meet a quota of letting 400 trucks move through the main cargo crossing between Gaza and Israel.

Olmert’s office said the two sides also discussed the possibility of expanding a month-old cease-fire in Gaza to the West Bank. However, he complained about the dozens of rocket attacks out of Gaza since the Nov. 26 truce.

Ghazi Hamad, a spokesman for the Hamas-led government, criticized Israel’s “trickery” in the meeting.

“Israel did not give any clear answers to many important issues, whether taxes or prisoners,” he said.

Abbas is locked in an increasingly bitter and violent showdown with Hamas. Last week, he said he would seek early elections, a dramatic challenge to the 10-month-old Hamas government.