British Prime Minister Gordon Brown says he is more optimistic about Middle East peace after talks with Israeli counterpart Benjamin Netanyahu here on Tuesday.
The two leaders discussed the issue of Israeli settlements, which Brown considered as a barrier to peace in the Middle East.
At a joint news conference after the meeting, Netanyahu said a demilitarized Palestinian state was needed if this was to be attained, adding that "we expect Palestinian partners to be courageous partners for peace."
Palestinian President Mahmoud Abbas has insisted any talks resume only once Israel agreed to a freeze in settlement building.
"With the help of our friends in the US, Britain and elsewhere we can achieve progress," Netanyahu said.
In addition, Britain and Israel shared the concerns over Iran's nuclear program.
Supporters of a two-State solution to the Middle East conflict held a demonstration at 10 Downing Street, shouting that "We are Palestinians" and "Free Palestine."
The meeting was overshadowed by the Lockerbie row, with Brown asked for his comments on the release in Scotland of the man jailed for the aircraft bombing, at the press conference, his first official engagement since returning from holiday.
Brown said he was "angry and repulsed" by Libyan welcome for Abdelbaset Ali al-Megrahi and insisted that the resolve to fight terror was absolute.
Netanyahu arrived in London on Monday and is expected to hold talks with the US envoy to the Middle East George Mitchell here on Wednesday.
The four-day European tour will bring Netanyahu to Germany on Thursday and he will meet German Chancellor Angela Merkel in Berlin.
