Palestinian negotiator Saeb Erekat on Sunday accused opposition leader and Likud Chairman Benjamin Netanyahu of "closing the door to any chance for peace," by insisting that regional talks focus on economic, rather than territorial issues.

Netanyahu says he supports the concept of a separate Palestinian state, but opposes the current U.S.-sponsored peace talks between Israel and the Palestinians.

He takes a hard line against ceding war-won territory and opposes partitioning Jerusalem, key Palestinian demands, and thinks talks should focus on economic matters.

"We need to make peace from the bottom up, rather than the top down, by improving the lives of Palestinians so that they have a stake in peace," Netanyahu told Jewish-American leaders at the UJC General Assembly on Sunday.

Erekat said Netanyahu's approach would destroy peacemaking because the U.S.-sponsored talks that began last year in Annapolis are designed to achieve a treaty on all outstanding issues between Israel and the Palestinians.

"The time to speak about economics and fragmentation is over", Erekat said. "It seems to me that if Mr. Netanyahu thinks this is the course, he is closing the door to any chance for peace.

Netanyahu's office said last week the Likud chairman would halt peace talks with the Palestinians in their current form if he wins a national election next February, and would instead step up efforts to develop the Palestinian economy.

Spokeswoman Dina Libster said the Israeli politician, a strong contender to be the next prime minister, believes the talks launched by President Bush in Annapolis, Maryland, last year have failed.

"He thinks the Annapolis process and negotiations taking place now are mistaken," Libster said.

The Annapolis talks aim to resolve all key areas of dispute with the Palestinians, including the conflicting claims to Jerusalem.

"Netanyahu does not want to halt talks, but he believes it's premature to talk about a final peace deal, and sharing control of Jerusalem is out of the question," Libster said.

Instead, he thinks talks with the Palestinians should focus on developing their economy, with political matters to be discussed only after economic conditions on the ground improve. "Economic peace has to come first," she said.

Netanyahu's positions appear to be in sharp contrast to the will of the international community and the Palestinians, who have said they object to any more interim agreements with Israel.