Israeli Vice Premier Shimon Peres said on Sunday that Israel must divide Jerusalem and leave the West Bank city of Hebron for a peace deal with the Palestinians to be reached.

He said he believes ‘there is no chance of reaching a conclusive agreement with the Palestinian Authority without giving back Hebron and dividing Jerusalem.’

Israel is currently building a wall isolating Jerusalem from the its Arab neighborhoods, excluding 55,000 Palestinian residents of Jerusalem suburbs outside of the city, and including at least 30,000 Jewish settlers into Jerusalem.

Peres, the Labor Party chairman, speaking to Israel Radio, also said the Gush Etzion settlement bloc, between Bethlehem and Hebron, would not be returned to the Palestinians under any future peace accord.

‘No one believes Israel will give back Gush Etzion [under any future agreement with the Palestinians],’ Peres said.

The Labor party has been Prime Minister Ariel Sharon’s key political ally in his bid to implement the disengagement plan and provided him with a safety net in several no-confidence votes in the Knesset.

Palestinians demand East Jerusalem for the capital of their future state.  This includes the old city of Jerusalem, site of the Aqsa Mosque and the Church of the Holy Sepulchre, which are considered sacred by Palestinian Muslims and Christians respectively.

Observers say that many Palestinians consider the Jerusalem issue as a red line that cannot be crossed.