Israel's Olmert says ready for more risks for peace

By Jeffrey Heller

NEW YORK (Reuters) - Israeli Prime Minister Ehud Olmert said on Sunday Israel would be prepared to take more risks for peace with the Palestinians now that President Mahmoud Abbas had formed a government without Hamas.

Promising to bolster Abbas, whose Fatah forces were routed by the Islamist Hamas group in the Gaza Strip, Olmert said:

"We will cooperate with this government. We will defreeze monies that we kept under our control because we didn't want these monies to be taken by Hamas to be used as part of a terrorist action."

Olmert, addressing American Jewish leaders on the first day of a three-day U.S. trip, said Israel could be working closer with the Palestinian government now.

"I personally believe that under the new circumstances, with a much greater cooperation between us and the Palestinian government, we can take perhaps more risks than we took in the past," he said.

Earlier, Olmert was deeply concerned with a rocket attack from Lebanon on northern Israel by what he said was apparently "a small Palestinian movement" that could be linked to al Qaeda.

"It's a very disturbing day," Olmert told reporters at a meeting with U.N. Secretary-General Ban Ki-moon at the New York home of Israel's U.N. ambassador.

In his remarks, Olmert pointedly stopped short of threatening any Israeli military response, saying the attack on the town of Kiryat Shmona "re-emphasizes the role of UNIFIL and Lebanon's army in southern Lebanon."