Syrian Foreign Minister Farouk al-Sharaa has said a peace deal could be reached with Israel within the next few months.

His prediction follows the announcement that the country's highest political body, the National Progressive Front, has endorsed President Hafez al-Assad's decision to resume peace talks.

The body said it agreed with President Clinton that the talks with Israel should resume at the point where they were suspended four years ago

But defiant Israeli settlers are stepping up their campaign to keep the Golan Heights, which Israel captured from Syria in 1967, under Israeli control.

Homes for hundreds of Jews were hurriedly inaugurated in the territory's largest settlment Katzrin on Sunday.

School children waved blue and white Israeli flags and sang patriotic songs among the rows of gleaming white houses.

But in Damascus, Mr Sharaa was in a very positive mood about peace talks which are scheduled to resume on Wednesday in the United States.

"I am so optimistic to say that a few months could be enough to reach a peace agreement," Mr Sharaa said, in the first Syrian reaction to the resumption of talks.

"I think this is a very important moment in the history of the peace process. We think we can achieve genuine results within a short time if all the parties have the good intentions."

Mr Sharaa will lead the Syrian negotiating team in Washington next week. Across the table will be the Israeli Prime Minister, Ehud Barak, who called off Sunday's weekly cabinet meeting because he was suffering from the flu.

Shouldering the cost

Israel has warned that it will be unable to fund the full cost of any pull-out from the Golan, with the necessary relocation of 17,000 settlers.

Finance Minister Abraham Shohat indicated that Israel was hoping the United States would help foot the bill.

"I have no doubt the Americans know that a process of this type requires removing military infrastructure, including warning stations, and will cost a lot of money," Mr Shohat said.

He did not put a price tag on the withdrawal, but a leading Israeli newspaper, Yedioth Ahronoth, said treasury officials were estimating a bill of up to $18 billion - $10 billion of that in compensation to Golan settlers for losing their homes.

In the past, Washington has often picked up the tab for implementing peace agreements in the Middle East. Most recently, the Wye Plantation agreement - signed in October 1989 but implemented nearly a year later - was backed by money from the US.

Referendum on withdrawal

Opinion polls indicate the Israeli public is deeply divided over the question of handing back the Golan Heights.

A poll by the Gallup organisation shows 46% against a handover as part of a deal which includes an Israeli troop withdrawal from Lebanon, and 46% in favour.

Israel's Prime Minister, Ehud Barak, has pledged to hold a referendum on any peace deal that is signed with the Syrians.