American State Secretary John Kerry is awaiting answers from Israel and the Palestinians on his compromise proposal for a return to negotiations between the two sides.

Meanwhile, he is promoting, along with Tony Blair, a multi-million-dollar economic plan to help the Palestinian Authority.

Mr Kerry spent last weekend in meetings in the region, his third visit in less than three months. While his proposals have yet to be published, they are believed to contain a compromise between the two sides’ demands.

Mr Kerry has agreed to the Palestinian demand that the talks must first address the borders of a future Palestinian state and that these borders should be based on the pre-1967 lines with the possibility of territorial exchanges. In addition, he has agreed with the Israeli demand that discussions over security arrangements must also be held at the start of the talks.

Israel’s demand that talks be held with no preconditions is also acceptable to Mr Kerry, who does not plan to ask Israel to freeze all settlement building. He has, however, asked Israeli Prime Minister Benjamin Netanyahu to unofficially suspend publicly-funded building.

Neither side has given their final answer and Mr Kerry held further meetings on Monday in Jordan with Israel’s representatives, Justice Minister Tzipi Livni and Mr Netanyahu’s personal emissary, Yitzhak Molcho.

Meanwhile, at the World Economic Forum in Jordan over the weekend, a rare public, high-profile meeting took place between the Israeli and Palestinian presidents. Mahmoud Abbas used the opportunity to warn in his speech that “many young people are beginning to lose confidence in the two-state solution because of what they are seeing on the ground”. He added that “we will not accept a Palestinian state in temporary borders, it will not bring an end to the conflict”.

Shimon Peres’s speech was more conciliatory. He said Israel saw in Mr Abbas a partner and believed in the vision of two states. Economics Minister Naftali Bennett responded saying that “contrary to what he (Peres) said, a majority of the Israeli public is firmly against retreating to the 1967 lines”.

In an attempt, meanwhile, to alleviate the Palestinian Authority’s financial difficulties, Mr Kerry and former British Prime Minister Tony Blair held talks with leaders in the region on a $4bn economic package which includes allowing the Palestinians to award licenses for extracting natural gas off the coast of Gaza, and to use this gas to power new electricity and desalination plants.

The plan includes allowing Palestinian firms to access the potassium mines at the northern end of the Dead Sea and encourages infrastructure development in part of Area C in the West Bank which is still under Israeli control.