(Adds start of talks, Israeli, Palestinian comment)

By Adam Entous

JERUSALEM, Jan 14 (Reuters) - Israel and the Palestinians opened on Monday their most serious peace talks in seven years despite differences over what each side aims to achieve.

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

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.

Israeli Foreign Minister Tzipi Livni and former Palestinian Prime Minister Ahmed Qurei, the chief negotiators, launched the talks in a Jerusalem hotel that will deal with issues such as borders and the fate of Jerusalem and Palestinian refugees.

But an Israeli official said it was unlikely Livni would be prepared to begin discussing those matters in detail at such an early stage.

"It's the first meeting and the first meeting by nature has to be preparatory," the official said.

Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas authorised the start of final-status talks but the leaders remain at odds over the scope of a deal.

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

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

"The difference between our position and the Israelis' is we hope to have a peace treaty concluded by the end of 2008. We should be done with the framework deal in one month or two months maximum," senior Palestinian negotiator Saeb Erekat said.

COALITION TROUBLES

But substantive talks on issues like Jerusalem could put Olmert's coalition government in jeopardy. The right-wing Yisrael Beiteinu party has threatened to pull out, possibly as early as this week.

The first final-status talks since 2001 were supposed to get under way soon after the Annapolis conference in November. But the Palestinians demanded Israel first commit itself to ceasing all settlement activity, as called for under the long-stalled "road map" peace plan.

Under U.S. pressure, Olmert responded with a de-facto halt to new construction work in West Bank settlements. But he has not called off plans to build hundreds of homes in a settlement near Jerusalem known to Israelis as Har Homa and to Palestinians as Jabal Abu Ghneim.

Olmert said Bush had assured him during his visit that the Palestinians would need to meet their security obligations under the road map before any peace deal was implemented.

It is unclear how Olmert and Abbas can reach a deal. Abbas wields little power beyond the West Bank after Hamas Islamists seized control of the Gaza Strip in June.

Weakened by the 2006 Lebanon war, Olmert could face new calls to resign at the end of the month when a commission of inquiry issues its final report on the conflict. (Additional reporting by Wafa Amr in Ramallah and Ori Lewis in Jerusalem; Editing by Dominic Evans)

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