Israel should release imprisoned Fatah leader Marwan Barghouthi, with or with out a prisoner exchange deal, Israel’s Industry, Trade and Labor Minister Binyamin Ben-Eliezer said on Wednesday.

“I call to release Marwan Barghouthi not in the deal with Hamas … these are two entirely different issues,” he told a news conference in East Jerusalem’s American Colony hotel.

Ben-Eliezer has called for Barghouthi’s release in the past.

The Iraqi-born Labor party member declined to speculate about the possibility of a prisoner exchange between Israel and Hamas that could involve the release of a thousand Palestinian prisoners in return for that of captured soldier Gilad Shalit.

“Hopefully it will end with good end for both sides,” he said of the indirect negotiations with Hamas.

A German mediator in the talks reportedly arrived in Gaza on Wednesday bearing Israel’s latest response in the negotiations. The Israeli side demanded that certain senior prisoners be expelled either to Gaza or abroad, instead of released to the West Bank.

Barghouthi, a popular Fatah leader often suggested as a successor to President Mahmoud Abbas, is one of the prominent prisoners Hamas wants released. According to some reports, Israeli officials suggested that Barghouthi

Ben-Eliezer was one of the Israeli ministers who met with Egyptian intelligence chief Umar Sulaiman when he visited Jerusalem on Sunday. Sulaiman is one of the officials involved in arranging the prisoner deal.

Ben-Eliezer did not say if the prisoner issue came up during the meeting. He said that he urged Egypt to bring Israel and the Palestinian Authority back to the negotiating table.

“I am looking to see that as soon as possible that Mubarak will call Prime Minister Netanyahu and Abu Mazen [Abbas] to resume talks,” he said.

The main thrust of Ben-Eliezer’s briefing was around the peace process. He urged Israel and Arab states to unite in opposition to Iran.

“We should focus on the real problems, and the real problem is not the Israeli-Palestinian conflict.,” he said.

He said Israel and Arabs together should face, “The major problems that may gather all the problems in the Middle East … the new theat, Iran.”

The minister said Abbas should drop his demand that Israel freeze expansion of West Bank settlements before negotiations are resumed.

“To take a brave decision is to sit down … everything is up for discussion. Once we are sitting we are talking about everything,” he said, speaking in a mixture of English and Arabic.

Palestinian-Israeli political negotiations were broken off in December 2008 when Israel launched a war on the Gaza Strip that left more than 1,400 Palestinians and 13 Israelis dead.

Since then, Abbas has insisted that Israel comply with its obligation under the US-backed Road Map peace plan to halt the construction of settlements build on West Bank land taken from Palestinians.

Israeli Prime Minister Benjamin Netanyahu in November declared a partial halt to expansion. The ban is limited to ten months, and does not apply to East Jerusalem and all construction that began before November. Abbas rejected the move as meaningless.

Asked about Israel’s recent decision to pour millions of dollars into settlements deep in the West Bank by incorporating them into its “national priority map,” Ben-Eliezer said the funds would not be used for construction.

“When you talk about giving priorities you’re not talking about building there,” he said, adding that the funding was earmarked for education and other services.