Efforts to forge a Middle East peace are "in a race against time" with both sides needing to do more -- Israel by fulfilling its commitments, including a settlement freeze, under an internationally endorsed plan for a two-State solution, and the Palestinians by resuming negotiations, a senior United Nations official warned here on Thursday.

"If we cannot move forward towards a final status agreement, we risk sliding backwards, with both the Palestinian Authority and the two-State solution itself imperiled," UN Special Coordinator for the Middle East Peace Process Robert Serry told the Security Council at a regular monthly briefing on the situation.

"As 2009 draws to a close, Israeli-Palestinian negotiations are yet to resume, confidence between the parties remains low, facts continue to be created on the ground, tensions persist in Jerusalem, and the actions of both Hamas and Israel are not contributing to the stability and welfare of Gaza. Even the genuine progress taking place in parts of the West Bank runs in parallel with negative trends," said Serry.

"We are in a race against time to overcome the contradictions on the ground and the crisis of confidence between the parties, and move decisively towards a political end game," he said.

While Israeli Prime Minister Benjamin Netanyahu's 10-month suspension of certain settlement activity is a step beyond previous government positions, by excluding East Jerusalem and other terms it falls considerably short of commitments under the so-called two-State Roadmap plan to freeze all settlement activity including "natural growth" and to dismantle outposts erected since March 2001, Serry said, calling on Israel to implement its obligations.

The Palestinians have suspended peace talks since Israel's military operations against Hamas in Gaza last winter, refusing to resume them until there is a total settlement freeze, and Serry called on them "to play their part, too, by engaging constructively on efforts to bring about resumed negotiations in earnest and continuing to advance their important state building project."

Reviewing activities over the past month, Serry said Israel needed to build on previous steps in the economic and security fields on the West Bank with a range of further measures, including a reduction of incursions into Palestinian areas and a further easing of closures, which currently stand at approximately575 obstacles to movement.

He also cited Israeli settler attacks against Palestinian civilians and property, including the "deplorable desecration" of arson against the mosque in Yassuf village. "Israel continues to fall short in imposing the rule of law on such violent extremists," he said. "I welcome the strong condemnation of the mosque attack by the Israeli Government, and I urge the authorities to seek out those responsible for this incident, along with other such acts of violence, and bring them to justice."

In Jerusalem, the situation remains tense, with Palestinian institutions still closed, contrary to the Roadmap and Palestinian properties under threat of demolition, while in Gaza imports were at about a quarter of the level before the Israeli blockade imposed after Hamas took over in 2007.

Food and hygiene items continue to constitute the vast bulk of goods allowed into the Strip, although there was an increase in the amount of cooking gas, and the lack of fuel for the power plant and a shortage of materials to repair damaged infrastructure leave the majority of the population subject to rolling electricity blackouts.

"It is essential that Israel increases the quantity and quality of supplies through the crossings, including to meet urgent winter needs in accordance with UN requests," Serry said, calling the blockade "unacceptable and counter-productive," and regretting thelack of a satisfactory response to a UN proposal to complete stalled projects for housing, schools and health facilities.

Smugglers and militants control commodities flowing through tunnels into Gaza from which Hamas and other groups launched thousands of rockets, to stop which Israel said it launched last winter's offensive. During the reporting period, however, violence was at a comparatively restrained level. In the past month, 10 rockets and mortars were fired toward Israel.

"I do not overlook legitimate Israeli concerns regarding the situation in Gaza," Serry said, voicing continuing concern at reports of weapons smuggling, and noting an Israeli airstrike. "It is our assessment that both sides do not seek escalation. There are possibilities for a sustained calm if wisdom and restraint prevails," he said.

In concluding, he said the U.S. Middle East envoy, George Mitchell, reassured him on Wednesday of President Barack Obama's determination to work not only for the early resumption, but also the early conclusion of two-State negotiations, as called for by the so-called Quartet, comprising the UN, European Union (EU), Russia and the United States.

"The secretary-general believes a revitalized Quartet must play its full role in urgently advancing a common agenda in the crucial few months ahead," he said. "He remains committed to an end to the occupation and an end to the conflict, through the creation of a Palestinian State living side-by-side with Israel in peace and security."