Continuing the construction freeze in West Bank settlements after it expires on September 26 would be impossible politically and would bring down the coalition, Prime Minister Benjamin Netanyahu told Spanish Foreign Minister Miguel Moratinos in Jerusalem on Wednesday.

Moratinos told Netanyahu that the European Union's position was that Israel should continue the freeze.

Palestinian Authority President Mahmoud Abbas has conditioned direct talks with Israel on a continued construction freeze.

Jerusalem will be closely monitoring the deliberations of the Arab League foreign ministers meeting today in Cairo. A subcommittee on the Arab peace initiative is expected to announce its continued support for indirect talks between Israel and the Palestinians, giving Arab League backing for Abbas' decision not to begin direct talks with Israel. The Palestinian position is that as long as no progress is made in the indirect talks there is no point in beginning direct talks.

Palestinian sources told Haaretz that Abbas seeks unequivocal clarifications from the United States that the framework for direct talks will include a declaration that the Palestinian state will be based on the June 4, 1967 borders and that border adjustments will be based on exchanges of territory. The PA also wants an Israeli declaration that the construction freeze in the settlements will continue and that construction in East Jerusalem will stop.

Although the PA can expect criticism of its position from the United States and even some Arab states it appears to be more worried at present about losing popularity on the Palestinian street if it were to resume direct talks with Israel now.

During yesterday's meeting Netanyahu reportedly told Moratinos that the Palestinians' conditions for renewing direct talks are unrealistic. He also told the Spanish foreign minister that only after a final-status agreement is reached will it be possible to drum up sufficient public support in Israel to push it through. Trying to do so now would bring down the ruling coalition and damage the peace process, Netanyahu said.

Several senior Palestinian and Arab officials have indicated that Abbas will tell the Arab League foreign ministers today that indirect talks with Israel should continue. But Moratinos told Netanyahu, Foreign Minister Avigdor Lieberman and President Shimon Peres that Abbas during their meeting in Amman on Tuesday that he was leaning toward agreeing to the resumption of direct talks. Moratinos said Abbas only needs to feel that he has the support of the Arab League for his decision.