Palestinian President Mahmoud Abbas welcomed Sarkozy's comments on settlements and Jerusalem, a senior aide said.
"It's a speech that the Israeli leaders need to listen to," Saeb Erekat said.
OPENING
In a part of his speech prepared for delivery, Sarkozy said he was prepared to host various peace talks. Although he did not pronounce it, a senior French official said he stood by it.
"(France) is ready to organise on its soil all the talks that could lead to (peace), whether in Israeli-Palestinian negotiations, the Syrian-Israeli dialogue, or the talks that will have to resume, one day soon I hope, between Israel and Lebanon," the text said.
France takes over the European Union's rotating six-month presidency on July 1, and as such will be a member of the Quartet of Middle East peace negotiators, along with Russia, the United States and the United Nations.
It was not clear how any facilitation of talks by Sarkozy would affect the Quartet's envoy, Tony Blair.
During his three-day state visit to Israel, which began on Sunday, Sarkozy has said an Israeli-Palestinian deal could be reached soon, a more optimistic view than most observers, who point to Olmert's weakness at home and divided Palestinians.
Despite deep public scepticism, the United States, the main broker in talks between Olmert and Palestinian President Mahmoud Abbas, hopes that a framework statehood deal can be achieved before President George W. Bush leaves office in January.
An official close to Sarkozy said preoccupation with the U.S. presidential election campaign created "a sort of an opening for anyone who wants to head into it" in efforts to aid talks.
"The president's visit could give an indication of who could, in the coming months, say 'why not create a bigger role for the European Union under France's presidency?'," he said.
