Israelis ushered in the Jewish New Year on Monday with festive family dinners, and a prediction from their outgoing prime minister, Ehud Olmert, that Israel would have to return virtually all the land it captured in the 1967 Mideast War in exchange for peace with the Palestinians and Syria.

Olmert exchanged holiday greetings with the Palestinian leader, Mahmoud Abbas. The Jewish New Year, or Rosh Hashana, coincides this year with Eid el-Fitr, one of the holiest days on the Muslim calendar. The two leaders, who have been meeting regularly in recent months, agreed to meet in the near future, officials said.

Still, months of talks have not produced tangible results, and many Israelis and Palestinians are skeptical about peace prospects. For many Israelis, the year that ended Monday was also disappointing in other ways. Top leaders, including Olmert, and a one-time president, Moshe Katsav were forced out by scandal.

"From the public, Israeli standpoint, the year that ends this evening should perhaps be erased from collective memory," wrote columnist Eitan Haber in the Yediot Ahronot daily.

"We are divided, skeptical, disbelieving, facing the greatest leadership crisis there has ever been here," added Yair Lapid, who also wrote in Yediot.

The New Year, which began at sundown, ushers in 10 days of soul-searching capped by Yom Kippur, or the Day of Atonement. Rosh Hashana is a time for festive meals, which traditionally include an apple dipped in honey to symbolize a sweet new year.

Israel's Central Bureau of Statistics released its annual population figures on the occasion of the holiday. It reported that 7.34 million people live in Israel, including 5.54 million Jews, or 75 percent of the population. In addition, there are 1.48 million Arabs, or about 20 percent, and 315,000 members of other groups.

The population growth rate held steady at 1.8 percent over the past year. The Arab population grew at a faster rate than the Jewish population, 2.6 percent compared to 1.6 percent.

Israel closed off the West Bank until late Wednesday, barring Palestinians from entering Israel. It's a measure common during Jewish holidays, to prevent possible attacks by Palestinian militants. Gaza has been virtually sealed off since June 2007 when the Islamic militant Hamas seized control by force, and the vast majority of the territory's 1.4 million Palestinians have been trapped there since then.

In his farewell interview, Olmert said Israel will have to give up virtually all of the West Bank and east Jerusalem if it wants peace with the Palestinians. Olmert also said Israel would have to leave the Golan Heights in order to obtain peace with Syria.

The comments were the clearest sign to date of Olmert's willingness to meet the demands of Israel's longtime enemies in peace negotiations. But their significance was uncertain, since Olmert's days in office are numbered and peace negotiations will soon become the responsibility of a different Israeli leader.

Palestinians, meanwhile, prepared for Eid el-Fitr, a three-day holiday marking the end of the Muslim fasting month of Ramadan. Eid el-Fitr will start either Tuesday or Wednesday, depending on when the sliver of the new moon is sighted.

In Gaza, outdoor markets were selling nearly all the supplies needed for the holiday, but prices are up sharply, compared to the period before the start of the blockade. Gazans get many of their supplies through smuggling tunnels under the Gaza-Egypt border.

A tunnel operator, who would only identify himself as Abu Nidal, said he's been working double time in the run-up to the holiday. "Before we used to enter 1-2 tons a day of goods in general," he said. "These days, from 5 to 6 tons." He added that the smuggled goods range from clothes and chocolate to balloons.