Senior Jerusalem sources on Saturday said Palestinians are refusing to renew peace talks with Israel, despite gestures Israel has made to lure them back to the negotiating table.
The officials added that U.S. special Mideast envoy George Mitchell might pressure Israel to advance negotiations by threatening to cut loan guarantees.
The Palestinian Authority has rejected U.S. Secretary of State Hillary Clinton's call to renew Israeli-Palestinian negotiations without preconditions, French news agency AFP reported on Saturday.
Chief Palestinian negotiator Saeb Erekat emphasized that peace talks will only resume if Israel implements a complete freeze on settlement construction, including in Jerusalem.
On Friday, the Obama administration and Jordan laid out a new tack in Mideast peace efforts, pressing Israel and the Palestinians to take on the tough issues of borders for a Palestinian state and the status of Jerusalem before addressing other obstacles.
"A resumption of peace talks requires the complete halt of settlements," AFP quoted Erekat as saying.
Erekat also said peace talks should continue from the point where they were stopped in December 2008.
Clinton and Jordanian Foreign Minister Nasser Judeh said that dealing with those matters first would eliminate Palestinian concerns about continued construction of Jewish settlements in disputed areas. Clinton and Judeh said negotiations should begin as soon as possible and be bound by deadlines.
"Resolving borders resolves settlements, resolving Jerusalem resolves settlements. I think we need to lift our sights and instead of looking down at the trees, we need to look at the forest," Clinton said after meeting Judeh at the State Department.
"We are working with the Israelis, the Palestinian Authority, Jordan and the Arab states to take the steps needed to re-launch negotiations as soon as possible and without preconditions, which is in the interests of everyone in the region," Clinton added.
Peace efforts in the past have tended to focus on broader issues, including settlements, the fate of Palestinian refugees and water, with even more contentious matters like borders and Jerusalem being left for so-called final status talks.
The Jordanian foreign minister said in a joint press conference after their meeting, "If you resolve the question of borders then you automatically resolve not only settlements and Jerusalem but you identify the nature on the ground of the two-state solution and [what] it looks like."
Both Clinton and Judeh spoke out against new Israeli housing construction in east Jerusalem, which the Palestinians claim as their capital, saying it was damaging to the process.
"We believe it is possible to realize the aspirations of both Israelis and Palestinians for Jerusalem and safeguard its status as a symbol of the three great religions for all people," Clinton said.
Their comments came as the Obama administration's special Mideast peace envoy, George Mitchell, prepares to visit Europe next week and Israel and the Palestinian territories later this month to try to re-launch stalled negotiations.
Mitchell will visit Paris and Brussels first to build support for the approach from European officials.
When he travels to the region, Mitchell is expected to be carrying letters of guarantees outlining the U.S. position.
The letters are likely to contain gestures to both sides. For the Palestinians, that would include criticism of settlements and the belief that the borders that existed before the 1967 Six-Day War should be the basis of a future peace deal.
For the Israelis, they would acknowledge that post-1967 demographic changes on the ground must be taken into account, meaning that Israel would be able to keep some settlements.
Clinton did not address the letters in her remarks. But she said the administration wanted a resolution that meets both the Palestinian goal of a clearly defined and viable state based on the borders that existed before the 1967 war with agreed swaps and the Israeli goal of security within boundaries that reflect subsequent developments.
"There is a hunger for a resolution of this matter, a two-state solution that would rebuke the terrorists and the naysayers, that would give the Palestinians a legitimate state for their own aspirations and would give the Israelis the security they deserve to have," Clinton said.
"This is a year of renewed commitment and increased effort towards what we see as an imperative goal for the region and the world." Clinton said.
After meeting with Judeh, Clinton was to see Egyptian Foreign Minister Ahmed Aboul Gheit and intelligence chief Omar Suleiman to continue the discussions.
Egypt and Jordan are essential to the peace push as they are Israel's only Arab neighbors to have fully recognized the Jewish state.
Judeh said it was essential that once they resume, the negotiations must be bound by a timeline and a clear plan with benchmarks.
"You cannot just have another open-ended process," he said. "Some deadlines have to be put on the table and these deadlines help to serve the parties rather than present obstacles in the path to peace. They help the parties put things in the right timeframe and the right perspective."
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