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Prime Minister Benjamin Netanyahu, U.S. Secretary of State Hillary Clinton and Palestinian President Mahmoud Abbas meeting at a peace summit in Sharm el-Sheikh on September 14, 2010. Photo by AP
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Expanding Israeli settlements on occupied Palestinian territory have reached a point of no return and could kill an internationally backed, two-state solution, a top Fatah official said on Monday.

Nasser al-Kidwa, a veteran diplomat who represented the Palestinians in the United Nations for years, said Israel's refusal to heed Palestinian and international calls to renew a freeze on building has put nascent peace talks in jeopardy.

"It's about to reach a point whereby it is going to kill the possibility of a two-state solution," Kidwa, a member of President Mahmoud Abbas's faction, told Reuters.

"Accordingly, going back to settler colonialism, building settlements, building infrastructure, ends peace negotiations and ends the peace process," he said, warning that there was a risk of bloodshed on both sides if the latest talks failed.

The partial 10-month moratorium on settler construction in the occupied West Bank expired on Sunday and Israel has refused to extend it, saying neither side should impose pre-conditions on the U.S.-brokered peace negotiations.

Palestinians say the settlements, which human rights groups estimate take up some 40 percent of West Bank land, will make it impossible for them to create a viable state and the issue is one of the core problems standing in the way of any peace deal.

"It's not a matter of a choice now. It's a must. Either you continue with the colonization of the land and thus end the two-state solution or you stop now and negotiate in good faith to achieve the two-state solution," Kidwa said.

"You do not go for peace and colonize the land at the same time," he added.

Palestinian officials made clear there would be no decision on whether to abandon the talks, as President Abbas had threatened, at least until an Arab League forum met on Oct. 4.

Kidwa said that if peace talks collapsed, both the Palestinians and the Israelis would suffer.

"It's going to be very messy, very difficult, very painful very bloody for everybody, for a long time to come," Kidwa said.

"But we will not be the party that actually destroyed the possibility of achieving peace on the basis of a two-state solution," he added.

Kidwa said the Palestinians have been demanding a halt to the settlements since they first started talks with the Israelis in early 1990s, adding that former Israeli Prime Minister Yitshak Rabin had agreed to halt the West Bank expansion.

"But after the assassination of Rabin (in 1995) we went through all kinds of crises because of settlement activities. It's the mother of all ills."