RAMALLAH, West Bank — Palestinian prime minister Salam Fayyad said on Wednesday he feared Israel intended to create a "Mickey Mouse" Palestinian state on only limited parts of the occupied West Bank.
 
"You cannot but wonder what it is that Israel has in mind when it talks about a Palestinian state," Fayyad told a press briefing in the West Bank town of Ramallah.

"By all appearances, it looks like they have a Mickey Mouse state in mind, and that is not what we are looking for."

Fayyad said he feared Israel intended to permanently occupy the strategically important Jordan Valley and vast swathes of the West Bank known as Area C where the Israeli military strictly limits Palestinian movement.

"The so-called Area C should not be looked at as disputed territory," Fayyad said, adding that such areas are an "integral part" of any future Palestinian state.
 
The United States has been struggling for months to get Israel and the Palestinians to restart peace negotiations last suspended during the Gaza war at the turn of the year.
 
Israel has so far resisted US pressure to freeze all settlement construction in the West Bank ahead of the renewal of peace talks.

But Fayyad said there was an "inherent contradiction" between the peace process and Israeli settlement activity, which the Palestinians have said must be halted before any new direct talks.
 
"Why should the peace process continue as business as usual when these blatant violations of international law are continuing," he asked.

Fayyad is a former World Bank economist who has been praised internationally and by Israel for reforming Palestinian finances and improving security in the occupied West Bank. He said he remains committed to a plan announced in August to build all the institutions of a viable state within two years.

"Sitting on our hands is not an option," Fayyad said. "We are not talking about declaring a state, but about building a state."
 
Western-backed Palestinian president Mahmud Abbas tapped the politically independent Fayyad to head the government after the Islamist movement Hamas seized power in the Gaza Strip in 2007.