Israeli Defence Minister Ehud Barak said today that he was leaving the Labour Party and forming a new faction in parliament, completing a split in the party over the handling of peace talks with the Palestinians.

Palestinian President Mahmoud Abbas and Israeli Prime Minister Ehud Olmert will meet on Sunday, an aide to the Israeli leader confirmed today - keeping their promise to US Secretary of State Condoleezza Rice to hold regular talks.

Palestinians took control of border traffic for the first time ever today, allowing thousands to cross into Egypt from the Gaza Strip in a limited opening of the joint frontier.

ISRAEL is proposing a troop pullout from two more Palestinian towns in the wake of meetings between the two sides' leaders and US President George W Bush, officials said yesterday.