Direct negotiations round in Sharm el-Sheikh concluded as both sides’ demands reviewed

Mubarak leads efforts to bring views closer, stresses Palestinians’ rights

Mitchell says negotiation vital for both sides, U.S. active partner

Netanyahu: No settlement freeze

Israeli minister says negotiations leading to nowhere, Netanyahu does not know what he wants

The second round of direct Palestinian-Israeli negotiations held between Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu with presence of U.S. Secretary of State Hillary Clinton was concluded in the Egyptian Red Sea resort city of Sharm al-Sheikh.

Israeli and Palestinian leaders failed in talks on Tuesday to resolve a dispute over Jewish settlement building but remain convinced they can reach a peace deal in a year, according to U.S. envoy George Mitchell.

No news emerged of any compromise on settlements after negotiations between U.S. Secretary of State Hillary Clinton, Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas.

With a 10-month Israeli moratorium on housing starts in settlements in the occupied West Bank due to end on Sept. 30, Mitchell seemed upbeat in the face of Palestinian threats to quit the new talks if building resumes.

"President Abbas and Prime Minister Netanyahu continue to agree that these negotiations, whose goal is to resolve all core issues, can be completed in one year," Mitchell told reporters in Egypt's Red Sea resort of Sharm el-Sheikh.

"Today the parties have begun a serious discussion on core issues."

Mitchell said three-way talks would continue on Wednesday in Jerusalem, followed by lower-level discussions between Israeli and Palestinian teams in the coming days.

Netanyahu may fly to Washington for more talks early next week, Israel's state-owned Channel One television reported.

Neither Netanyahu nor Abbas made any immediate public comments. The meeting was their first since direct talks were re-launched in Washington on Sept. 2 after a 20-month hiatus, with a declared goal of resolving the main issues in a year.

The six-decade-old dispute revolves around settlements, security, borders and the fate of Palestinian refugees.

Netanyahu, whose coalition government is dominated by pro-settler parties, said on Sunday he would not extend the construction moratorium but could limit the scope of further building in some settlements.

Echoing U.S. President Barack Obama's view, Mitchell said: "We think it makes sense to extend the moratorium, especially given that the talks are moving in a constructive direction."

He would not say whether there had been progress on the moratorium issue, saying only that "we believe that we are moving in the right direction overall".

Mitchell said Washington was aware of the issue's political sensitivity in Israel and had called on Abbas to "take steps that help, encourage and facilitate this (peace) process".

Palestinians say the settlements, built on land they want for a state, would deny them a viable and contiguous country.

Nabil Abu-Rdainah, a spokesman for Palestinian President Mahmoud Abbas, described the U.S.-sponsored talks as "serious" adding that there were "still real obstacles".

A senior U.S. official told reporters in Sharm el-Sheikh that Abbas and Netanyahu were "serious in wanting to find a way to continue these discussions".

"My hope and expectation is that they will find a way to do that but I don't want to either overstate or understate the case," he added.

Abbas has threatened to walk out of the talks if Israel does not extend the partial, self-imposed moratorium.

Clinton traveled on to Jerusalem and was to hold further talks there, in Ramallah and in the Jordanian capital Amman over the next two days.

Mitchell will visit Syria on Thursday and Lebanon on Friday in an effort to promote a wider peace between Israel and the Arab world, said a U.S. official who asked not to be named.

In continued violence, Israel said its troops had killed a Palestinian militant when a tank opened fire after a rocket-propelled grenade was shot from the Gaza Strip at its troops. Palestinian medics said four people were wounded.

The Democratic Front for the Liberation of Palestine, a militant faction, claimed responsibility for the incident.

Egyptian President Hosni Mubarak met in Egypt's Sharm el-Sheikh on Tuesday with Palestinian President Mahmoud Abbas ahead of a tripartite meeting about the Middle East peace process.

The Mubarak-Abbas meeting discussed latest developments in the running Israeli-Palestinian direct negotiations, which kicked off on Sept. 2 in Washington and ended a 20-month deadlock.

Prior to the meeting with Abbas, Mubarak had held talks with U. S. Secretary of State Hillary Clinton and Israeli Prime Minister Benjamin Netanyahu.

The second round of direct talks on Tuesday is the first to take place in the region after the restart in nearly two years.

Israel on Wednesday made clear it would give the Palestinians no ground on the West Bank settlements issue that is clouding the freshly renewed Middle East peace diplomacy.

Netanyahu told Clinton at the start of an evening meeting that Israel will not continue a moratorium on West Bank settlement construction due to expire on 26 September. "This was a gesture limited in time that cannot be extended," state-run Voice of Israel radio quoted him as saying.

That puts Netanyahu's Palestinian negotiating partner President Mahmoud Abbas in a corner since he has pledged the Palestinians will not continue the newly resumed talks with Israel unless the moratorium is extended. Abbas later arrived at Netanyahu's residence for further talks that followed up their discussions at a summit hosted by Egypt.

Clinton struck an upbeat tone despite the settlements impasse.

"They are getting down to business and they have begun to grapple with the core issues that can only be resolved through face-to-face negotiations. I believe they are serious about reaching an agreement that results in two states living side by side in peace and security."