The United States should openly blame Israel for the "collapse" of the peace process, a senior Palestinian official said on Thursday, in one of the bleakest assessments yet on Middle East peace efforts.

New Israeli plans to build near East Jerusalem show Prime Minister Benjamin Netanyahu does not want to resume peace talks, Palestinian officials said.

"It's time for the American administration to tell the world that Israel holds the responsibility for the collapse of this peace process," chief Palestinian negotiator Saeb Erekat said. "Israel has chosen settlements and not peace," he told Reuters.

The United States has been trying to revive direct negotiations between Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu but weeks of diplomacy have yet to yield a breakthrough.

The Palestinians want Israel to halt all construction on land where they aim to found an independent state, including areas in and around Jerusalem captured by Israel in the 1967 Middle East war.

Abbas and Netanyahu held three rounds of direct talks in September but the Palestinians withdrew from the negotiations three weeks after they started when Israel lifted restrictions on settlement building in the West Bank.

Netanyahu had imposed the restrictions for 10 months. He has faced strong opposition within his cabinet to any further curbs on settlement building. His government is dominated by parties that support the settlers, including his own rightist Likud.

ISRAEL "NOT WILLING" TO RESUME TALKS

Israel announced on Wednesday plans for 625 new homes in Pisgat Zeev, which is built on West Bank land Israel annexed to its Jerusalem municipality immediately after the 1967 war. "This Israeli signal shows that they are not willing and not ready for any deal in order to resume the negotiations," Nabil Abu Rdainah, Abbas's spokesman, told Reuters.

Israel sees Pisgat Zeev and other districts it has built in and around Jerusalem since 1967 as part of its capital. The Palestinians regard them as settlements, a view supported by the European Union.

Israel's building in and around Jerusalem has strained its ties with the United States this year. Washington says such building does not help peace negotiations.

The United States has been in talks with Israel over a set of incentives designed to produce another settlement freeze that would allow the negotiations to resume.

The Palestinian officials said Israel's new settlement building plans amounted to a rejection of the U.S. efforts.

Erekat said the United States should now recognise a state of Palestine in the West Bank and the Gaza Strip with East Jerusalem as its capital if it wished "to preserve the two-state solution".

Referring to the Pisgat Zeev building plans, Abu Rdainah said: "It looks like this is an Israeli message to the Palestinians and the Americans that they are refusing any deal resuming the negotiations."