Born to the right of Israeli politics, Olmert, 63, was once a prince of the Likud - the nationalist party built by the former prime minister Menachem Begin - who espoused a hard-line position of no compromise with Palestinians on the West Bank and a boycott of the Palestine Liberation Organisation.

As a young member of the Knesset, Olmert even voted against Begin's historic 1979 peace treaty with Egypt.

Yet amid hardened perceptions of Olmert as a recalcitrant, distant and cynical Prime Minister with nothing constructive to add to public discourse, he stunned Israelis with an interview of profound frankness published on the eve of the Rosh Hashanah holiday - New Year on the Jewish calendar - daring to express what no Israeli prime minister has said before.

The time had come, Olmert told the Yedioth Ahronoth newspaper, for Israel to leave the occupied territories, including the West Bank and East Jerusalem, and the Golan Heights as well. In a devastating critique of Israel's system of government, Olmert pinned its fundamental problems on the reality of the military occupation. There was no proper government in Israel, Olmert argued, because there were no proper borders and he dismissed out of hand the security approach that governs Israeli thinking.

"The time has come to say these things," Olmert said. "The time has come to put them on the table.

"In the end we have an opportunity that is limited in time - a time so short as to cause terrible distress - in which we may be able to take a historical step in our relations with the Palestinians and a historical step in our relations with the Syrians. In both cases, the decision we have to make is a decision that we have been refusing for 40 years to look at open-eyed.

"We face the need to decide, but are not willing to tell ourselves, yes, this is what we have to do. We have to reach an agreement with the Palestinians, the meaning of which is that in practice we will withdraw from almost all the territories, if not all the territories. We will leave a percentage of these territories in our hands, but will have to give the Palestinians a similar percentage, because without that there will be no peace."

Including in Jerusalem?

"Including in Jerusalem," said Olmert, "with special solutions that I can envision on the topic of the Temple Mount and the sacred and historical sites."

Taking aim at those Israeli politicians on the right among whom he once counted himself, especially when he was mayor of Jerusalem through the 1990s, Olmert said that security for Israel could not be achieved without giving up some parts of Jerusalem that it now occupies.

"Whoever wants to hold on to all of the city's territory will have to bring 270,000 Arabs inside the fences of sovereign Israel. It won't work," Olmert said. "I am the first who wanted to enforce Israeli sovereignty on the entire city. I admit it. I am not trying to justify retroactively what I did for 35 years. For a large portion of these years, I was unwilling to look at reality in all its depth."

With the current round of peace talks being sponsored by the United States drifting as the Bush Administration's time in office draws to a close, Olmert told Israelis they had no time to waste.

"The goal is to try to reach for the first time the delineation of an exact border line between us and the Palestinians, where the whole world - the United States, the UN, Europe - will say, these are the borders of the State of Israel, we recognise them, we anchor them in formal resolutions of international institutions. These are Israel's borders, and these are the recognised borders of the Palestinian state.

"It is possible that the implementation of the agreements will take time. It may take many more efforts to ensure that there will be no terrorism from there and no threats. We all understand this, but first let's reach agreements. Why the fear? Whom are we afraid of? Who thinks seriously that if we sit on another hilltop, on another hundred metres, that this is what will make the difference for the State of Israel's basic security?"

Hounded by seemingly endless corruption allegations throughout his prime ministership - none of which have resulted in any charges being laid - Olmert spoke with the clear-eyed frankness of a politician who could finally say what he thought.

A source close to Olmert, who spoke to the Herald this week on condition of anonymity, said Olmert felt this week's interview was the "apogee of his political transformation from right-wing hawk to centre-left pragmatist".

"In addition to trying to define the parameters of reform for Israel's political system, he was also trying to define himself as a changed man politically," the source said.

"This is a man whose childhood taught him one way of thinking, that hardened in his first years as politician, then whose period as mayor of Jerusalem taught him another way of thinking, and then after his surprise, yet brief, tenure as Prime Minister he came to see Israel in a completely different light. It changed finally to someone who saw his country as reality obliged him to. He is certainly a man who is now more at peace with himself and his country, if not with the political system."

Whatever the intent of Olmert's comments, it seems a majority of Israelis are still some way behind him in terms of their own thinking. In a poll to gauge the mood of the nation on the eve of Rosh Hashanah, 41 per cent of Israelis believed that illegal settlement outposts in the occupied West Bank should be removed; 45 per cent said they should be made into further permanent settlements.

With that level of support for the settlement movement, which has in the past 10 days shown that it is prepared to resort to violence to make its political arguments, finding solutions on a final border agreement with Palestinians presents an extraordinarily difficult set of circumstances for any Israeli politician, particularly the new leader of the governing Kadima coalition, Tzipi Livni, who is expected to be sworn in as Israel's second female prime minister by the end of the month.

A commentator, Isi Leibler, observed that Israelis, after having struggled through what he described as "yet another annus horribilis", were entering the New Year facing dark clouds.

"It is beyond belief that even on the eve of his departure in disgrace, Olmert still persisted in his obsessively vain efforts to reach agreement with the Palestinian Authority at any price," said Leibler. "After the unsavory Kadima primaries, we now ask ourselves: is the inexperienced Tzipi Livni, who only defeated an unpopular Shaul Mofaz by a slither of a margin, fit to lead the nation?

"Will she become a harbinger for reform and positive change or simply indulge in Knesset musical chairs and provide us with more of the same?"

With the Opposition Likud leader, Benjamin Netanyahu - also a former prime minister - ahead in the polls, should Livni be forced to seek early general elections before she can entrench herself in the prime minister's office, Israel may well be headed back towards the right, in the opposite direction that Olmert clearly wants to be part of his legacy.