VATICAN CITY — After a Jan. 29 meeting in Jerusalem, the Israel-Holy See Permanent Bilateral Commission said that the two parties are making progress in negotiating fiscal issues and the legal status of Church property in Israel.

But while there may be hints of progress, analysts warn that it’s still too early to predict a final resolution of the long-running deadlock between Rome and Jerusalem over tax and property issues.

Despite eight years of on and off negotiations, Israel has yet to fulfill the tax- and property-related guarantees specified by the 1993 Fundamental Agreement between Israel and the Holy See. The treaty protects the Church’s tax status in Israel and also protects Catholic holy sites and properties.

“Even with all the good will in the world, and that is not lacking on either side, an agreement of this kind, which is so complex and technical in nature, requires a major investment of time,” said Father David Jaeger, a Franciscan friar who was one of the key framers of the 1993 agreement. “To understand what the prospects are, it is important to observe the frequency and length of the negotiations — the lengthier the sessions, the closer the agreement is.”

Pope Benedict XVI and Israeli Prime Minister Ehud Olmert discussed the issue during Olmert’s Dec. 13 visit to Rome.

Oded Ben-Hur, Israel’s Ambassador to the Holy See, said that Olmert told the Pope that he had recently instructed Israeli officials to expedite full implementation of the Fundamental Agreement, which forms the basis for diplomatic relations between Israel and the Holy See.

The root of the problem, as far as Israel is concerned, is that if it grants the Church tax immunity and property rights — rights that should be guaranteed under a 1947 de facto United Nations statute — Israel would lose its capacity to arbitrarily levy taxes on Church property.

Israeli officials also fear that if the Church wins such rights, other religious groups would demand the same.

Consequently Israel has dragged its heels on recognizing the Fundamental Agreement as a formal international treaty, whose norms must be followed by the Israeli government.

But observers wonder why Israel did not question its obligations before it signed the accord. Ambassador Ben-Hur said he believes the framers of the Fundamental Agreement simply failed to foresee the problem, even though the matter is clearly addressed in the agreement.

Some have speculated that successive Israeli governments have kept the negotiations stalled so that an aspect of the treaty that they found unacceptable would never be implemented.

“There is a danger this might be happening,” one source close to the negotiations told the Register. “This might have the most serious consequences because in 1993 the Holy See trusted this plan.

“All of these issues should have been raised [by Israel] before signing the Fundamental Agreement — it’s an international law agreement and so there’s no turning back,” the source added. “Now it’s signed, the honorable thing for Israel to do is abide by its commitments.”

Rabbi David Rosen, international director of interreligious affairs of the American Jewish Committee and a long-time observer of the negotiations, believes the Vatican is also to blame for not clearly spelling out its demands from the beginning.

Rosen said that Israeli leaders have often promised to resolve the matter, thinking that it is simply bureaucratic, and have asked Israeli officials to deal with it. But the Israeli officials realize they are “not mandated to create a precedent as originally understood and as the Vatican expects, and so the officials stall each time,” Rosen said.

The rabbi suggested the Vatican should send “a very clear personal letter to Olmert on the matter and hold him to it personally.”

However, Ben-Hur stressed that neither Israel’s Supreme Court nor the Israeli parliament will agree to the Vatican’s requests, because of the precedent that would be set for other religions to advance similar claims. In fact, in 2004 Israel’s Supreme Court declared the treaty was not an international treaty and therefore not binding.

Many analysts believe the issue can only be resolved by Israel’s prime minister specifically ordering his ministers of finance and justice to create a sui generis (unique) legal category for the Church.

Despite the continuing obstacles, negotiators on both sides retain optimism that a resolution can be achieved.

“This treaty is like a building,” said the source close to the negotiations. “You can either build it very quickly, or one little brick at a time.”

(Zenit contributed to this report.)