A meeting of the Ad Hoc Liaison Committee, which coordinates financial aid for Palestinians, ended abruptly Tuesday in New York due to a disagreement between Palestinian Prime Minister Salam Fayyad and Deputy Foreign Minister Danny Ayalon on the terms of a two-state solution.

Ayalon canceled a scheduled joint press conference with Fayyad after the meeting.

"We did not reach an agreement because the Palestinians did not agree to the terms of a two-state solution," Ayalon told Haaretz.

"Israel will continue to ease  restrictions imposed on Palestinians," Ayalon said, but stressed that this will only be done within the "confines of the security requirements. We will not gamble with the lives of our citizens."

Ayalon also rejected the Palestinian demand that Israel allow exports from Gaza, explaining that “Hamas continues to smuggle massive amounts of dangerous weapons.” Ayalon argued that any exports coming out of Gaza would have to pass through Israel, creating a real danger that Hamas will take advantage of the export commerce to reinforce its terror activity.

The committee of donating nations meets every six months. The joint press conference was expected to include a statement calling to put an end to the Gaza-bound aid flotillas from around the world.