Arab League chief Amr Moussa said Wednesday that if a Palestinian state is not established soon there will be a single state for Israelis and Palestinians.

"We cannot just continue to raise the flag of two states living next to each other in peace," he told a panel on the sidelines of the World Economic Forum in Davos.

"If this is not materialized, we'll have to resort and soon to another area, a different area, which is one state for Israelis and Palestinians on the basis of citizenship," Moussa said. "We are reaching this point, either this or that. But to continue the situation as it is, occupation, resistance, crisis, managing the crisis, it cannot continue."

Israeli-Palestinian talks have been stymied over Israel's refusal to freeze construction on all settlements.

Israeli Prime Minister Benjamin Netanyahu declared his country's permanent claim to parts of the West Bank on Sunday, angering Palestinians again and complicating efforts by President Barack Obama's Mideast envoy to get both sides back to the negotiating table.

'Now is the moment of truth'

Moussa was asked about a comment by Javier Solana, the European Union's former foreign policy chief, who said in November that moving to set up a viable Palestinian state "has to be done with time and with calm and in an appropriate moment." He was also asked whether the Arabs would support European recognition of a Palestinian state or putting the question of a Palestinian state to a UN Security Council resolution.

"All of us have tried managing the crisis and we have come to a conclusion that a Palestinian state will come," Moussa said. "If it doesn't come there will be one state. It's either or, and we are moving to this area and soon, sooner than many people think."

"As I say jokingly, the book of political tricks has been played on us and applied on us. Now there is no more tricks that we will accept," he said.

"Now is the moment of truth," Moussa said. "We need peace, and we are after a true Palestinian state."

Asked by AP Television News whether EU recognition of a Palestinian state would aggravate the situation, he replied:

"They will say so: 'Whatever you do, you do this, you will aggravate the situation,' as if the situation is not already grave. Very grave."

"I don't buy those arguments. These are among the gimmicks that have been played on us: that this will aggravate the situation, that this will do this to the Americans that this will do this to the West and this will do this to Israel, and then you find yourself doing nothing and then everyone is glad. No. We don't have to buy those cheap arguments any more," he said.