Prime Minister Benjamin Netanyahu and the eight senior cabinet members were unable to reach an agreement regarding the Quartet's initiative for renewed talks between Israel and the Palestinians, despite prolonged discussions lasting until 2:00 A.M. on Wednesday.
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Netanyahu was expected to support the Quartet's proposal; however, due to a lack of consensus with the senior cabinet members, no decision was reached.
The plan, presented Friday at UN Headquarters in New York by EU foreign policy chief Catherine Ashton, calls for Israel and the Palestinian Authority to renew direct talks within a month, to present proposals on borders and security within three months, and to reach a final agreement by the end of 2012.
Israeli government officials said they believed PA President Mahmoud Abbas will prefer to see his statehood bid through in the UN rather than renewing dialogue with Israel.
Meanwhile, the United States condemned on Tuesday Israel's plan to build 1,100 new housing units in the Gilo neighborhood of Jerusalem, which lies beyond the Green Line.
Speaking at a press briefing, U.S. State Department spokeswoman Victoria Nuland said: "We are deeply disappointed by this morning's announcement by the government of Israel approving the construction of 1,100 housing units in East Jerusalem."
Nuland said the United States considers the Israeli move "counterproductive to our efforts to resume direct negotiations between the parties."
When asked how the U.S. could get the Palestinians to return to dialogue after such a statement, Nuland responded that negotiations are difficult and there are issues on both sides, but that Israel had shown flexibility at least in terms of its response to the Quartet's call to return to talks.
In response to the decision to build in Gilo, a statement from the office of PA Prime Minister Salam Fayyad said: "The Israeli prime minister claims to have no preconditions, but with this decision is putting concrete preconditions on the ground."
"[Netanyahu] says there should be no unilateral steps, but there could be nothing more unilateral than a huge new round of settlement building on Palestinian land."
According to sources at UN Headquarters, the United States already has a majority of seven members on the Security Council that will thwart the Palestinian bid for full UN membership.
The Palestinian application, which the Security Council discussed unofficially behind closed doors for the first time Monday, is be discussed publicly today and once again, unofficially, on Friday.
European Union representatives have told the Palestinians that any unilateral move on their part will put European aid to the Palestinian Authority at risk, according to senior UN officials in New York.