Palestinian and Israeli leaders shook hands publicly at a Lisbon conference today after meeting face-to-face for the first time since February in hopes of narrowing a yawning gap over peace moves.
Israeli Foreign Minister Mr Shimon Peres, who had talks with Palestinian President Mr Yasser Arafat over dinner, said today: "I think it was a good occasion to exchange views informally in a rather agreeable atmosphere."
" One of the...greatest problems we are facing is an emotional breakdown, the fact that the parties have lost confidence," Mr Peres said.
At the other end of the Mediterranean, tensions on the ground remained high but, 17 days into a fragile ceasefire, violent incidents were relatively few.
Fighting on the Israel-Lebanon border yesterday and clashes at West Bank and Gaza flashpoints overnight cast a shadow over the impact of US Secretary of State Mr Colin Powell's three-day peace mission to the region this week.
Mr Powell was seeking a way to end nine months of intercommunal bloodshed, sparked by a Palestinian uprising against Israeli occupation, in which about 600 people have been killed.
He persuaded the two sides on Thursday to agree to a seven-day period of complete ceasefire as a test of their commitment to press ahead with peace moves.
A source close to last night's dinner meeting said Mr Peres had told Mr Arafat that achieving seven straight days of calm would pave the way for entry into a longer cooling-off period and set the peace plan into motion.
The plan, crafted by a panel headed by former US senator Mr George Mitchell, calls for a series of confidence-building measures, including an end to Jewish settlement construction on occupied Arab land.