(Adds Tuomioja comments on soldier, possible prisoner swap) By David Brunnstrom TAMPERE, Finland, Nov 27 (Reuters) - The European Union hailed signs of hope for Middle East peace on Monday after a ceasefire took hold in Gaza and Israel said it was prepared to free many jailed Palestinians in return for a captured soldier. EU foreign policy chief Javier Solana said the Quartet of Middle East peace brokers, who would meet before the end of the year, could help by setting up a mechanism to monitor the truce. "For the first time for a long period we do see some very concrete rays of hope," Finnish Foreign Minister Erkki Tuomioja said in Tampere, where Spain outlined proposals for Middle East peace at a dinner with Arab and Israeli ministers. Solana said he had discussed the Gaza ceasefire with Israeli Foreign Minister Tzipi Livni and it appeared to be holding. "If that is the case, then I think we are in a new good moment," he told Reuters. "Let's hope we can get as much as possible from the ceasefire, then the release of prisoners, then a meeting of (Israeli Prime Minister Ehud) Olmert and (Palestinian President Mahmoud) Abbas. "If the ceasefire is maintained...that is a very important achievement and I hope it will make possible to open a new page, and talks between the two sides will take place and Abu Mazen (Abbas) will manage to get a new government." The Gaza ceasefire took effect early on Sunday and Livni told a news conference in Tampere she hoped a similar truce could be agreed in the West Bank. "I do hope that is only one step out of many, in order to promote something in the Middle East which can be more than a ceasefire," she said. "VERY ENCOURAGED" Solana said he was "very encouraged" by a major policy speech by Olmert. Olmert said on Monday Israel was ready to free many jailed Palestinians if a captured Israeli soldier was released and to evacuate some West Bank settlements to bring about a real peace. Tuomioja, speaking for the rotating EU presidency, told a news conference that people "who do know" were optimistic about the release of the soldier. He also said that releases could start in a short period of time, possibly within a few days. The Finnish minister said the mood was different from what it had been at similar points in the past. "We have not had the same parties and we have not had the same attitudes and reactions to a ceasefire before," he said, but added that the current mood of hope must not be allowed to slip away. Solana said the Quartet -- the United States, the European Union, Russia and the United Nations -- could help by monitoring the ceasefire. "I think the quartet has a very fundamental responsibility at this point in time," he said. There were signs all parties, including Hamas, were ready to establish an internationally acceptable Palestinian government, Tuomioja said. This could mean an end to sanctions imposed on the Palestinian Authority because of Hamas's refusal to recognise Israel and renounce violence when it came to power in March. "That would mean political engagement, economic engagement, humanitarian engagement and ending the isolation of the Palestinian Authority," Tuomioja said. Palestinians' living conditions must be improved immediately and they needed a credible vision of a better future, he said. "No ceasefire will hold for ever unless there is also progress on the political front." Solana said he believed, after speaking to Abbas on Sunday, the formation of a national unity government was "pretty near". "The principle of establishing such a government...I think is a decision which has been taken. Now it is a question of finding the right equilibriums, the right people." (Additional reporting by Rex Merrifield)
