Prime Minister Gordon Brown said on Sunday he believed differences in Middle East peace talks could be bridged although Israel said it disagreed with his criticism of Jewish settlement expansion.

"What separates the sides is not unbridgeable. It's bridgeable," Brown told reporters after separate talks with Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas.

"There is a sense from what I've heard today that people feel they can . get to a solution. The sooner that happens the better and I'm urging people to move forward with as great a speed as possible," he said.

Brown, on his first visit as prime minister to Israel and the Palestinian territories, said he had made clear to Olmert that Britain wanted a freeze on Jewish settlement-building.

Olmert told a joint news conference with the British prime minister that Brown had criticised Israel's settlement policy.

"While you disagree with us, at least I hope you understand better the position of Israel on some of these issues," he told Brown.

"I'm absolutely confident . this should not stand in the way of achieving an agreement between us and the Palestinians. We are closer than ever . to an agreement," he said, echoing a comment he made in Paris last week.

"We have some disagreements which are very significant, but I believe that we can overcome these disagreements within the time frame that has been set for these negotiations, which is hopefully by the end of this year," he said.

Brown told reporters later: "We should not lose sight of the big prize - that for the first time we can have this comprehensive settlement."

"There is an opportunity within our grasp," he added.

NEW PALESTINIAN AID

Speaking earlier at a news conference with Abbas in the West Bank city of Bethlehem, Brown announced $60 million (30 million pounds) in new aid to the Palestinians.

He said Jewish settlement expansion had made peace harder to achieve. "It erodes trust. It heightens Palestinian suffering."

Abbas and Olmert launched peace talks last November at a U.S.-sponsored conference in Annapolis, Maryland, with the goal of reaching a statehood deal before U.S. President George W. Bush leaves office next January.

Citing obstacles such as settlement building, Abbas said an agreement this year would require "a tremendous effort."

Brown visited the Church of the Nativity, on the spot in Bethlehem where Christians believe Jesus was born, and laid a wreath at the Yad Vashem Holocaust memorial in Jerusalem.

Brown, who will on Monday become the first prime minister to address Israel's parliament, said Britain would host another Palestinian investment conference in London later this year as a follow-up to one held in Bethlehem in May.

Brown, who succeeded Tony Blair as prime minister in June last year, has seen his poll ratings plunge as the credit crunch and high fuel prices have hit the economy. His Labour party lags behind the opposition Conservatives by up to 20 percentage points in opinion polls.