Israeli Prime Minister Ehud Olmert said Sunday evening that Israel would like to call for a regional conference with all Arab leaders, including the king of Saudi Arabia.

Olmert made the remarks at a joint news conference with visiting German Chancellor and current EU president Angela Merkel.

"I want to take this opportunity of being here with the European Union president in order to invite all Arab leaders, including the Saudi king," he said to reporters.

"I am telling the heads of Arab countries that if the Saudi king initiates a meeting of the moderate states' leaders and invites both me and Palestinian (National) Authority Chairman (Mahmoud Abbas), I would be glad to go there and speak our mind," Olmert said.

Earlier, the United States and Egypt have proposed that Israel should agree to quickly start talks with a committee of Arab states on how to move the stalled Mideast peace process forward, diplomats involved in the matter said.

The Arab League renewed last week a 2002 Saudi-proposed peace plan that would give Israel recognition in exchange for the Jewish state's withdrawal from all captured territories and a just solution for the Palestinian refugees.

Olmert welcomed the decision, saying it showed a major change in the way Arab states viewed Israel, but he said Israel did not accept all parts of the plan.

Olmert also denied reports that there was an American plan, coordinated with Israel, to strike Iran in the summer, saying it was "a false and baseless rumor."

"I hope that no one operates on the basis of unfounded rumors in order to create a move which could drag us to a violent conflict without any reason," the prime minister said.

Merkel, who arrived in Jerusalem on Saturday and will also visit Lebanon, promised to do everything for the release of the kidnapped Israeli soldiers.

During her first Middle East tour as the EU president, Merkel also met with Abbas in the afternoon.

Referring to the negotiations with the Palestinians, Merkel said that Germany would work to take advantage of the opportunity, but added that the conditions did not exist in the Palestinian unity government as Hamas representatives did not recognize the Quartet conditions of recognizing Israel, renouncing violence and respecting previous peace deals.

The chancellor said that without the Arab states' support in the process a solution would not be achieved.

On Sunday morning, Merkel told Israeli Foreign Minister TzipiLivni that Europe will try to build a new burst of international efforts to restart peace talks between Israel and the Palestinians, but ultimately the two sides must resolve their differences themselves.