A further Israeli-Palestinian peace summit may be held next month, the Israeli Prime Minister, Mr Ehud Barak, told cabinet colleagues last night following the collapse of the Camp David summit on Tuesday. And lower-level negotiations are set to resume on Sunday.
However, Mr Barak also told his ministers that the chances of reaching a final peace treaty were no better than 50-50. And the early signs are that the Palestinian President, Mr Yasser Arafat, is in no mood to make the compromises on the status of Jerusalem and Palestinian refugee rights that a final treaty would require, and may at best be ready only for a partial agreement, deferring some aspects of the Israeli-Palestinian dispute for years to come.
Cheered on by a surprisingly small crowd of supporters in the West Bank town of Ramallah, Mr Arafat yesterday declared that the Palestinian flag would soon be raised from the walls, the mosques and the churches of Jerusalem. He was, he said, holding out for "all of Jerusalem. All of it. All of it."
He also insisted that he would declare statehood on September 13th as promised, and would not compromise on the right of return for refugees, especially the 350,000 "of our brothers and sisters [in refugee camps] in Lebanon".
Mr Arafat has been hailed as "a national hero" in the media controlled by his Palestinian Authority for his unbending negotiating stance at the two-week Camp David summit. Further reports of the deal he turned down indicate that Israel suggested he establish a capital for his state to be called "Al-Quds" - the Arabic name for Jerusalem - under which he would gain full sovereignty over Arab neighbour
hoods on the edge of the city and some neighbourhoods within the existing Jerusalem municipal borders, and "administrative" or "religious" rights to parts of the walled Old City, including the Temple Mount, with the Old City formally remaining under Israeli sovereignty.
A more generous US proposal would have given him sovereignty in two quarters of the Old City - the Muslim and the Christian - but Mr Arafat turned this down too; it is not clear whether Israel would have accepted it. Yet another proposal offered Mr Arafat a presidential office in the Muslim quarter.
Mr Barak, who has expressed deep disappointment at the failure of the summit, has charged that Mr Arafat proved unable to make the "historic decisions" that were necessary for a treaty.
Some of Mr Arafat's negotiating team at Camp David reportedly pressed him towards accepting the Israeli proposal, but Mr Arafat would not budge, insisting on full sovereignty throughout the areas of Jerusalem that Israel captured in the 1967 war, with the exception of the Western Wall and the Jewish quarter of the Old City.
It appears to be those, more moderate members of the delegation who are now spreading optimism about the continuing prospects for progress, and also hinting - despite Mr Arafat's insistence to the contrary - that the September 13th deadline for statehood might be shifted.
Mr Saeb Erekat, the chief Palestinian negotiator, for instance, said that the sides were now "above 80 per cent" of the way to a final deal, and predicted that a final peace settlement would be reached ahead of the September 13th deadline.
Mr Erekat is set to hold talks on Sunday with his Israeli counterpart, Mr Oded Eran. And, with Mr Barak's remarks about another summit, there is growing speculation that the US Secretary of State, Ms Madeleine Albright, may come to the region shortly. But for the next few days, Mr Barak will be preoccupied trying to muster a parliamentary majority to defeat a no-confidence motion in the Knesset on Monday.