Vice Prime Minister and Strategic Affairs Minister Moshe Ya'alon said Tuesday that he saw "no chance of reaching a peace deal with the Palestinians in the near future".

"In the eyes of Palestinians, the occupation began in '48 and not in '67," Ya'alon told Army Radio. "Not only Hamas thinks this – Abu Mazen [Palestinian President Mahmoud Abbas] does too."

"Their refusal to recognize Israel as a Jewish state shows they have no interest in having Israel as a state beside theirs," he added.

The remarks made by Ya'alon, a former chief of staff of the Israel Defense Forces, to Army Radio appear contrary to Prime Minister Benjamin Netanyahu's stated commitment on trying to reach an agreement within a year.

His comments also came a day after the Palestinian Authority flatly rejected Netanyahu's offer to suspend settlement construction in exchange for a guaranteed recognition of Israel as a Jewish state. The Palestinians demand an entire freeze to construction, and have said they will not resume talks until such a guarantee is made.

The U.S., which mediated the proxy peace negotiations and played a key role in the short-lived direct talks that followed, dodged a direct response to the offer, saying its position on settlements has not changed.

"U.S. policy has been consistent. Both President Obama and Secretary Clinton are committed to Israel’s democracy as a Jewish state," a State Department official said.

The direct negotiations were relaunched in Washington early last month but came to a halt on September 26, when Israel 10-month freeze expired.