(Adds statement by Palestinian legislative body)

By Adam Entous

JERUSALEM, Jan 14 (Reuters) - Israel and the Palestinians opened their most ambitious peace negotiations in seven years on Monday, urged by U.S. President George W. Bush to reach a deal within a year despite deep public scepticism.

Israeli Foreign Minister Tzipi Livni said she would keep details of her talks with former Palestinian Prime Minister Ahmed Qurie confidential, but later told parliament she was "prepared to make significant territorial concessions" to further Israel's interests.

It took seven weeks to start so-called final-status talks, announced at a U.S.-sponsored conference in Annapolis, Maryland, underscoring the hurdles U.S. President George Bush faces in getting a Palestinian statehood deal in his final year in power.

The first final-status talks since 2001 were supposed to begin soon after November's Annapolis conference. But the Palestinians demanded Israel first commit to ceasing all settlement activity, as stipulated by a 2003 peace "road map".

Palestinian President Mahmoud Abbas immediately came under new domestic pressure to insist Israel halt settlements.

The Palestinian Central Council, a legislative body, said in a statement after a two-day meeting that it "reiterated the need to condition continuation of the talks to Israel's commitment to halt all settlement activity in all areas occupied in 1967".

The Council is an institution of the Palestine Liberation Organisation (PLO), which is dominated by Abbas's Fatah faction.

The PCC has acquired new significance since the Palestinian Legislative Council, a parliament dominated by Hamas Islamists, was effectively frozen after Hamas seized control of the Gaza Strip in June in fighting that has weakened Abbas's authority.

Pressed by the United States, Israeli Prime Minister Ehud Olmert has ordered an effective halt to new construction in settlements. But Israel does not view building on West Bank land it has annexed to Jerusalem as settlement. Olmert has not called off plans to build at a site near Jerusalem that Israelis call Har Homa and Palestinians call Jabal Abu Ghneim.

Monday's negotiations followed Bush's first presidential visit to Israel and the occupied West Bank last week, when he set the goal of signing a peace treaty in 2008 and encouraged both sides to begin talking in earnest.

But it is unclear how Olmert and Abbas, both politically weak, can get a deal in that timeframe, let alone implement it.

Abbas wields little power beyond the West Bank since Hamas seized Gaza. Olmert may face new calls to resign when an inquiry into the 2006 Lebanon war issues its final report on Jan. 30.

QUIET NEGOTIATIONS

Chief negotiators Livni and Qurie, who met in a Jerusalem hotel, launched the talks that will deal with issues such as borders and the fate of Jerusalem and Palestinian refugees.

"We started today talking about all the core issues, Jerusalem, refugees, borders, settlements. We talked about these issues in general. The talks were positive but the path ahead is difficult," Qurie told Reuters after the meeting.

Livni said before the session that future talks would "take place quietly" away from the "glare of the cameras".

Media attention during peace talks that ended in 2001 caused negotiators to grandstand, which "raised expectations and led to disappointment and violence", she said.

Israeli officials said Olmert was seeking a deal that would outline a "framework" for a Palestinian state with implementation delayed until the Palestinians could ensure Israel's security.

Abbas wants a final peace treaty enabling him to declare a state by the end of the year.

Senior Palestinian negotiator Saeb Erekat said a framework accord could be reached "in one month, or two months, maximum", clearing the way for a full treaty by 2009.

In the Gaza Strip, Hamas official Sami Abu Zuhri said the negotiations were "a crime against the Palestinian people". (Writing by Jeffrey Heller, Additional reporting by Wafa Amr in Ramallah and Nidal al-Mughrabi in Gaza; Editing by Tim Pearce)

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