Ehud Olmert, who met with Palestinian President Mahmoud Abbas last week, made the offer as part of a border, refugee and security agreement between Israel and a future Palestinian state.
Olmert, who has vowed to step down as early as September, feels there is time to reach an agreement during his remaining time in office, the paper said.
Under Olmert's proposal, in return for the land retained by Israel in the West Bank, the Palestinians would receive alternative land in the Negev, adjacent to the Gaza Strip. The Palestinians would also have free passage between Gaza and the West Bank without any security checks.
A senior Israeli official said the Palestinians were given preliminary maps of the proposed borders.
Once a border is agreed upon, Israel would be able to build freely in the settlement blocs to be annexed.
According to the Haaretz, Olmert's proposal introduces a new stage in the arrangement: Israel would immediately receive the settlement blocs, but the land to be transferred to the Palestinians and the free passage between Gaza and the West Bank would only be delivered after the Fatah government of Abbas retakes control of the Gaza Strip.
In this way, Olmert could tell the Israeli public that Israel is receiving 7 percent of the West Bank and an agreed-upon border, while the Israeli concessions will be postponed until Hamas rule in Gaza has ended.
