But the mayor of Ras Hamis, a Palestinian neighbourhood on the eastern fringe of this divided city, says that he can’t think of a worse fate for him and his constituents than being handed over to the weak and ineffective Palestinian Authority right now.

“If there was a referendum here, no one would vote to join the Palestinian Authority,” Mr. Gheit said, smoking a water pipe as he whiled away the afternoon watching Lebanese music videos. “We will not accept it. There would be another intifada [uprising] to defend ourselves from the PA.”

In comments that are likely to stir fierce debate on both sides, Israeli Prime Minister Ehud Olmert suggested yesterday that Israel could relinquish several Arab areas on the periphery of East Jerusalem. The idea is likely to please very few, since many Israelis consider Jerusalem indivisible, while few Palestinians would accept a peace deal that didn’t include sovereignty over the al-Aqsa mosque compound, the third-holiest site in Islam.

Those who live in the neighbourhoods Mr. Olmert spoke of handing over are nonetheless worried that Palestinian president Mahmoud Abbas, who is seen as weak and desperate for an achievement after losing control of the Gaza Strip to the Islamist Hamas movement, will accept the offer. They dislike the idea of their neighbourhoods, which are generally more prosperous than other parts of the West Bank, being absorbed into the chaotic Palestinian territories.

Mr. Gheit, with two posters of “the martyr Saddam Hussein” hanging over his cash register, can hardly be called an admirer of the Jewish state. But he says that an already difficult life would get worse if those living in Ras Hamis and the adjoining Shuafat refugee camp were suddenly no longer able to work in Israel, or use its publicly funded health system.

The 53-year-old said he’d be happy to one day live in a properly independent Palestinian state, but not one that looks anything like the corruption-racked and violence-prone areas that are split between the warring Hamas and Fatah factions. “I don’t believe in these factions. I only believe in putting bread on the table for my children. I fight only for them. At least in Israel, there’s law.”

Mr. Gheit said that over the past five years, some 5,000 people have moved into Ras Hamis from other parts of the West Bank, concerned that they would lose their Israeli identification cards if they didn’t live within the city limits. There would be a mass exodus into other parts of the city, or other towns in Israel, if it looked likely that Ras Hamis and Shuafat, home to a combined 50,000 people, were about to be declared no longer part of Jerusalem, he said.

Another concern for many in Shuafat is that they would lose access to the al-Aqsa mosque if they were transferred on paper from East Jerusalem to the West Bank. West Bank Palestinians are generally barred from entering the city, even to pray.

In a speech yesterday to Israel’s parliament, the Knesset, Mr. Olmert stayed far away from such issues, but made his most explicit comments to date about offering some parts of Jerusalem to Mr. Abbas.

“Was it necessary to annex the Shuafat refugee camp, al-Sawahra, Walajeh and other villages and state that this is also Jerusalem? I must admit, one can ask some legitimate questions on the issue,” Mr. Olmert said, referring to the Israeli decision 40 years ago to annex East Jerusalem, including outlying Arab neighbourhoods. The entire city was declared to be Israel’s capital, a decision no other country recognizes.

Notably, all three neighbourhoods that Mr. Olmert mentioned are on the farthest outskirts of the city, within the greater municipality of Jerusalem, but outside the eight-metre-high concrete wall that Israel has constructed through the city.

The Israeli government says the barrier was constructed for security purposes; critics say the barrier, which zigzags deep into East Jerusalem and the West Bank, has always been intended to establish a de facto border. Mr. Olmert’s suggestion doesn’t go as far as previous Israeli leaders have in negotiations with the Palestinians. At the 2000 peace talks in Camp David, Israel’s then-prime minister, Ehud Barak, offered almost all of East Jerusalem to Yasser Arafat. The talks collapsed, primarily over the status of the Old City and the holy sites within it.

Efraim Inbar, the director of the Begin-Sadat Center for Strategic Studies, said that Mr. Olmert’s offer was an empty one, since he knew it was doomed to be rejected by the Palestinian side, which wants all of East Jerusalem for its capital, including its holy sites.

He said that Mr. Olmert, who is facing three separate criminal investigations into his financial dealings, must make conciliatory gestures toward the Palestinians in order to keep the left-wing Labour Party in his coalition. However, Prof. Inbar said the Prime Minister is too weak to carry through, since he also needs to keep right-wing parties onside.

Mr. Olmert is also under pressure from the United States to make concessions ahead of a peace conference that President George W. Bush is scheduled to host next month. However, hopes are fading fast for the November peace conference and Israel’s Haaretz newspaper reported that it was likely to be postponed.