Palestinian Prime Minister Salam Fayyad said Sunday that the declaration of a Palestinian state would be a mere formality once the institutions of a Palestinian state are created.

Speaking at a press conference in Ramallah organized by the Saban Forum, Fayyad said it is important to create institutions that are functioning, committed to the Palestinian people and free of corruption.

Palestinian officials have they are preparing to ask the United Nations to endorse an independent state without Israel's consent because they are losing hope they can achieve their aspirations through peace talks. The announcement drew a harsh rebuke from Israeli officials.

Fayyad did not comment on the independence plan.

Fayyad spoke at a news conference with U.S. Senator Joseph Lieberman, who praised Fayyad's efforts to develop the economy.

"I know some people are concerned that this is unilateral," Fayyad said, referring to his development plan. "But it seems to me that it is unilateral in a healthy sense of self-development."

Fayyad said building national institutions is an important step in preparation for the establishment of a Palestinian state within the 1967 borders with Jerusalem as its capital.

He added thatsaid it was the responsibility of the Palestinian Authority to lay the groundwork for statehood, while it is up to the Palestine Liberation Organization to actually declare a state when the conditions are right.

Fayyad said his government is dedicated now more than ever to providing resources to West Bank areas negatively affected by settlements and the separation fence.

"Our people are continuing to demonstrate against everything that is illegal under international law, including the separation fence," he said.

The press conference was held at the end of a discussion Fayyad held with 80 guests as part of the Saban Forum, organized by Israeli-American media tycoon Haim Saban. Some 40 guests arrived in Ramallah from the United States, including three U.S. senators and five congressmen. Forty Israelis were also in attendance, including Bank of Israel Governor Stanley Fischer.

'We come as investors'

U.S. Senator Joe Lieberman said of the visiting members of Congress that to a certain extent they arrived as investors, and are going to carry back to Washington their our own positive reports about how the money of the U.S. Congress has been spent.

Lieberman told the assembled reporters that the U.S. representatives were impressed by the progress visible in Ramallah.

Howard Berman, a Democratic congressman from California, said the American visitors agree with U.S. President Barack Obama's comments in his Cairo speech, in which he said the U.S.-Israel bond is unbreakable. But he said that feeling in no way precludes the strong commitment to the idea of Palestinian statehood and to the end to the occupation.

In response to a question posed by Haaretz over his vision of Mideast peace, Lieberman said his objective is that there be two states, the Jewish state of Israel and a Palestinian state, and that in both those states, every citizen has equal rights, regardless of ethnic or religious background.

Erekat: Israel doesn't want two state solution

Chief Palestinian negotiator Saeb Erekat said earlier Sunday that frustrated Palestinians had decided to turn to the United Nations Security Council after 18 years of on-again, off-again negotiations with Israel.

The Palestinians seek an independent state that includes the West Bank, Gaza Strip and east Jerusalem - areas captured by Israel in the 1967 Six-Day War.

"Now is our defining moment. We went into this peace process in order to achieve a two-state solution," he said. "The endgame is to tell the Israelis that now the international community has recognized the two-state solution on the '67 borders."

U.S. efforts to restart Israeli-Palestinian peace talks are deadlocked. Prime Minister Benjamin Netanyahu has urged the Palestinians to negotiate with him, but they refuse, saying Israel must first stop building settlements on lands they claim. Netanyahu refuses to endorse the 1967 lines as the basis for an agreement.

Even if the UN endorses the Palestinian idea, it would be virtually impossible to implement while Israel remains in control of the West Bank and East Jerusalem. Nearly 500,000 Israelis live in these areas, in addition to thousands of Israeli troops stationed on bases.

The Palestinians already declared independence unilaterally on Nov. 15, 1988. The declaration was recognized by dozens of countries, but never implemented on the ground.

In the meantime, the Erekat declined to say when the Palestinians would make their appeal to the UN, signaling that the threat may be aimed in large part at putting pressure on Israel.

Barak: Agreement needed to stop unilateral declaration

Defense Minister Ehud Barak warned that Israel risks watching the international community line up behind the Palestinians if negotiations are not restarted. Without an agreement, there is a possibility that support will increase for the Palestinians declaring a state unilaterally, he told the Cabinet on Sunday.

Vice Prime Minister Silvan Shalom, a member of Netanyahu's Likud Party, warned the Palestinians against taking any one-sided action. "I think the Palestinians should know that unilateral actions will not lead to the results they hope for," he said.

Nimr Hamad, an adviser to Palestinian President Mahmoud Abbas, said the Palestinians have no intention of rushing to the Security Council.

"We are going to have to prepare for this well and to hold political and diplomatic talks. We want the Security Council to discuss this only after we've been given assurances," he told the Israeli daily Maariv. "There is no point in rushing just so that we collide with an American veto."

As one of the five permanent members of the Security Council, the U.S. wields veto power over any resolution. Israeli media predicted that the U.S., Israel's key ally, would veto the move.

Hamad said Abbas would travel to Cairo on Wednesday to discuss the plan with Egyptian President Hosni Mubarak.

There was no immediate reaction from Security Council members. But Erekat said Russia, another permanent member of the Security Council, and unspecified European nations are on board with the Palestinian plan.

Complicating the matter is the status of the Gaza Strip. The territory is currently ruled by Abbas' rivals, the Islamic militant Hamas group. Israel withdrew unilaterally from Gaza in 2005.

PA seeks to extend Abbas term

In the West Bank, meanwhile, the Palestinians announced plans to extend the term of Abbas after a recommendation to postpone presidential elections indefinitely.

Last week, Palestinian election officials postponed a planned Jan. 24 presidential election, saying Hamas' opposition made it impossible to hold the vote in Gaza. The decision cleared the way for Abbas, who had threatened to quit politics after the election, to remain in office.

Mohammed Dahlan, a top official in Abbas' Fatah Party, said Sunday that the PLO's central committee will meet next month to extend Abbas' term until elections can be held.