Middle East envoy Tony Blair is developing a plan that would spell out practical steps that Israeli, Palestinian and business leaders would gradually take to try to boost peace prospects, officials said on Wednesday.

Israel is expected to be asked under the plan to take a series of steps including easing travel restrictions in the occupied West Bank, officials involved in the talks said.

Steps for the Palestinian side would focus initially on improving President Mahmoud Abbas's security hold on the West Bank, a key Israeli precondition for removing roadblocks and checkpoints that restrict travel there, the officials said.

Israeli government sources said the goal was to set a rough timeline to roll out what diplomats refer to as "deliverables" -- feasible incremental steps meant to improve Palestinian daily life and increase Israeli confidence in Abbas.

Israeli government officials said Israeli Prime Minister Ehud Olmert does not want the plan to set specific dates for implementation. Doing so would raise expectations that may not be achievable due to security developments, one official said.

A Blair spokesman would neither confirm nor deny that any action plan was being developed. "As of today, there is no 'action plan'. As we develop ideas, we will discuss these very closely with the Palestinians and Israelis," the spokesman said.

The Quartet of Middle East mediators -- the United States, Russia, United Nations and the European Union -- gave Blair a limited mandate mainly focused on economic development and building governing institutions in the occupied West Bank.

But Abbas's aides hope the former British prime minister will go further and use his influence to get Olmert to enter serious negotiations for a Palestinian state ahead of a U.S.-sponsored conference in November.


DEVELOPMENT PROJECTS

Hamas Islamists seized control of the Gaza Strip in June but Abbas's secular Fatah faction still holds sway in the West Bank.

Olmert is seeking a broadbrush "declaration of principles" in time for the November conference, whereas Abbas wants a more explicit "framework" agreement with a timeline for implementation on the core issues of borders, Jerusalem and the fate of Palestinian refugees.

"Sometimes high expectations can lead to frustration and frustration can lead, especially in Palestinian society, to violence," Israeli Foreign Minister Tzipi Livni told a news conference with her Italian counterpart. "I would like to see more realistic expectations."

Livni said the November conference should embrace the "widest common ground" and could serve as the "beginning of a more concrete process between Israel and the Palestinians".

In addition to bolstering Abbas's security forces, Israeli sources said the plan would seek to expand an amnesty programme for Palestinian militants.

Blair would help mobilise support for the Palestinians to build a government-run social safety-net programme to wean Palestinians off Hamas charities, officials said.

The plan was also expected to set out specific economic development projects, including a Turkish-Israeli-Palestinian industrial park in the West Bank, business leaders said.

Israel's manufacturing association asked Blair to chair an economic summit in Washington on the sidelines of the larger U.S.-sponsored conference on statehood.

The association said the conference would bring together Israeli, Palestinian, regional and international business leaders. Blair told the group he would consider the idea.