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Mideast Prisoner Swap Near

Israeli officials say they're close to a deal on a prisoner swap with the Islamic guerilla group Hezbollah in Lebanon that would also include Palestinians.

Under the deal, reports CBS News Correspondent Robert Berger, Hezbollah would release a kidnapped Israeli businessman and the bodies of three Israeli soldiers. Israel would free about 400 Arab prisoners, including 200 Palestinians. The deal does not include missing Israeli airman Ron Arad, whose plane went down over Lebanon 17 years ago. Arad is believed to be alive.

Nor does it include Palestinian uprising leader Marwan Barghouti, but Israel's defense minister acknowledged Tuesday that progress has been made in the German-brokered negotiations.

Barghouti's lawyer, Khader Shkirat, said Barghouti tops Hezbollah's list of prisoners it wants released. Barghouti, on trial in Israel for his alleged role in attacks that killed 26 Israelis, is the West Bank leader of Yasser Arafat's Fatah movement and is considered a possible successor to the Palestinian leader.

Meanwhile, an Israeli delegation is in Washington trying to resolve a dispute with the U.S. over Israel's controversial security fence in the West Bank.

With the U.S. threatening to reduce an aid package to Israel, the Israeli government has changed the path of the West Bank security fence. For now, Israel won't confiscate a large piece of West Bank land to protect Jewish settlements.

Cabinet Minister Uzi Landau doesn't agree.

"If you really want to protect your people, you need to have the fence over there," he said.

There will now be a break in the fence in the disputed area, but none in U.S. aid to Israel.

Those settlers are costing the Israeli government at least an extra $2500 a year, each.

The Israeli government spends at least $560 million a year on subsidies, infrastructure and education for 220,000 Jewish settlers living in the West Bank and Gaza Strip, according to a report Tuesday in the Israeli daily Haaretz.

The figure does not include military spending in those areas.

Successive Israeli governments have refused to disclose how much they spend on settlements. Haaretz said it compiled the figure after three months of research, including interviews with dozens of government officials and experts.

The settlements are seen as one barrier to reaching a peace agreement between Palestinians and Israelis. Palestinians say Israel uses the settlements to grab lands claimed for a Palestinian state.

The number of Israeli settlers living in the West Bank and Gaza Strip hit 220,000 last year, an increase of 5.7 percent from 2001, according to a report released Tuesday by Israel's Central Bureau of Statistics.

The settlers' growth rate far outstripped the total Israeli growth rate of 1.6 percent and was more than double the growth rate in any region of Israel, according to the report.

Palestinians say continued building in the settlements is proof Israel is not committed to peace.

Spending on settlers and settlements also has become a tense issue in Israel, which is suffering from a deep economic crisis. Over the past three years, Israeli salaries have plummeted more than 10 percent and unemployment is approaching 11 percent.

The money included spending on roads, housing, electricity, education and recently canceled tax breaks for settlers, according to the newspaper.

Meanwhile, a suspected Jewish extremist told investigators that he and other members of his group planned simultaneous attacks on Muslim worshippers at several mosques, including Islam's third holiest site in Jerusalem, a security official said Tuesday.

The attacks were meant to avenge victims of Palestinian violence, said the official, who spoke on the condition of anonymity. He confirmed a report in the Maariv daily.

Shahar Dvir-Zeliger, an alleged member of the group, told investigators the attacks were to take place during Friday prayers, when the Al Aqsa Mosque compound in Jerusalem and mosques across Israel would be crowded, the official said. Muslims account for nearly 20 percent of Israel's 6.6 million people.