A day before the official end of his government's term, Olmert urged his intended replacement Benjamin Netanyahu to continue the peace process with the Palestinians and seek a two-state solution.
"There is no Jewish state without the guarantee of a Jewish majority for generations to come, and this majority does not exist in Greater Israel, which is home to millions of Palestinians," he said. "The conclusion is clear: Two states for two peoples. There is no alternative – a two-state solution with massive international backing. It's possible."
Olmert told the session that his government was close to reaching an agreement with Palestinian President Mahmoud Abbas, saying "given enough time, I believe we could have presented a peace agreement for the Knesset and cabinet's approval. This agreement would require a dramatic, painful and heart-breaking compromise."
Addressing Netanyahu, the PM said Israel was on the brink of direct peace negotiations with Syria. "You will receive all the details. Take the initiative fearlessly, don’t be deterred and history will repay you.
Netanyahu, for his part, told the session that his government "will make every effort to achieve a just and lasting peace with all of our neighbors and the Arab world in its entirety.
"Any one of our neighbors who truly is willing to make peace will find our hand outreached," he said.
'Not too late'As for the peace agreement with Egypt, the Likud chairman said, "Today we are marking three decades of calm, and this historic change should be praised whole-heartedly," and sent his regards to the Egyptian people and to President Hosni Mubarak "who is continuing in path of peace."
Defense Minister Ehud Barak said in his speech that "unfortunately, (late Palestinian leader) Yasser Arafat was no Anwar Sadat, and neither is (Syrian President Bashar) Assad."
"I believe that it is not too late; we should not give up and continue to strive for peace," he said.
Earlier Monday, Netanyahu informed his party's Knesset members of their designated positions in his new government.
MK Michael Eitan was named minister-without-portfolio in charge of improving the governmental service to the citizens. MK Moshe Kahlon will be appointed communications minister, MK Yossi Peled will be a minister-without-portfolio, and MK Gila Gamliel will serve as deputy minister for women and youth affairs.
MK Yuli Edelstein will receive an operational role, Netanyahu said, although his areas of responsibility have yet to be determined. MK Gilad Erdan was informed of his appointment as environment minister and will also be a member of the Judges' Election Committee and serve as the liaison minister between the government and the Knesset.
MK Limor Livnat will serve as science, culture and sport minister, and will also serve in the National Security Cabinet, and MK Gideon Sa'ar will be appointed education minister, and will also sit in the National Security Cabinet.
Netanyahu also informed MK Yisrael Katz of his decision to appoint him to the position of transportation minister.
MK Reuven Rivlin, also from Likud, was appointed Knesset speaker, while MK Yuval Steinitz is slated to be named finance minister.