The discussion was held following Olmert's meeting with Palestinian President Mahmoud Abbas and the gestures he promised him. IDF Chief of Staff Dan Halutz and other security officials also took part in the discussion.
In the discussion it was decided to ease the movement of Palestinians in crossings and checkpoints, to provide permits for the passage of medical teams, to ease the transfer of goods and to build interchanges which will allow Palestinians to pass easily.
Some of the changes, it was decided, will be implemented within one week. According to a basic principle in the plan set by the defense establishment, the Gaza Strip and the West Bank will be differentiated.
In the discussion at Olmert's office in the Knesset, it was also decided to ease restrictions on merchants entering Israel and changing the perception of the secure passage in the Jerusalem vicinity.
It was also decided to ease the passage of VIPs according to lists and permits, ease the passage of international organization members, as well as the passage of merchants and businesspeople, and increase the number of permits to enter Israel.
Regarding the Karni crossing in the Gaza Strip border, it was decided to upgrade the crossing and implement the plan to ease restrictions in the crossing and place screening machines there.
During the discussion it was decided to pave 10 interchanges along Road 60, which crosses the West Bank. According to defense establishment figures, paving these intersections will lower the friction between the Palestinian population and IDF soldiers.
Through these intersections, Palestinians will be able to move easily between Arab villages and communities and the main cities in the West Bank. The cost of building the roads is estimated at tens of millions of Israeli shekels.
The prime minister said at the end of the meeting that the government plans to significantly ease restrictions on the population not involved in terror and allow a reasonable fabric of life to Palestinians civilians.
"The proposed plan may contribute to an improvement in the atmospheres, may strengthen the moderate forces and remove civil population from the circle of terror. I hope that by the holiday of Eid al-Adha the Palestinian population will feel a significant improvement in its life fabric.
"This does not mean that we are letting go of our war on terror. We will continue to fight those who cause terror with the same firmness," Olmert said.
Peretz: 27 checkpoints to be removed soon
Earlier, Peretz referred to the issue of taking down roadblocks during a meeting of the Knesset's Foreign Affairs and Defense Committee.
Peretz told the committee members that he had instructed the Israel Defense Forces to prepare to remove 59 checkpoints out of the 400 spread across the West Bank.
The defense minister has made a decision to remove 27 roadblocks in the coming days, but the IDF has yet to provide its recommendations regarding the removal of these roadblocks.
The defense minister's remarks on the attempt to improve the Palestinians' quality of life led to a profound discussion.
Knesset Member Effie Eitam (National Union-National Religious Party) claimed that "in the past two years we have managed to develop a terror attack thwarting system thanks to the checkpoints."
He warned that "any attempt to remove them, against the Shin Bet and IDF's stance, may return terror attacks to the heart of Israel."
'Humiliation at checkpoints causes terror'
MK Ami Ayalon (Labor) claimed, from the opposite side, that "the humiliation at the checkpoints is what causes terror."
Eitam replied, "What humiliation do Hizbullah and al-Qaeda terrorists go through when they are running the global war of terror against Israel?"
MK Silvan Shalom (Likud) joined in, saying that "removing the checkpoints will lead to damage and will resume terror."
Machsom Watch activist Sara Klatzko responded to Peretz' statement, saying that "there are about 60 checkpoints in the West Bank today, more than 40 of which are manned on a permanent basis, with more than 400 blockings.
"These blockings are physical obstacles preventing access of most communities in the West Bank for traffic routes. In many cases, the checkpoints prevent passage from two nearby Palestinian communities.
"We believe that if the issue had been examined seriously, a significant number of the checkpoints could have been removed, and the passage through the checkpoints could definitely have been eased.
"We always wonder how the Palestinians manage to withstand it, and don’t understand how they even don’t manage to live under such conditions," Klatzko added.
Ronny Sofer, Ilan Marciano, Moran Rada and Hanan Greenberg contributed to the report