Palestinian President Mahmoud Abbas Thursday stood firm on his demand for a halt to settlement building before talks with Israel can resume, as US officials scrambled to rescue the collapsing peace process.

"We will not accept negotiations as long as settlements continue," Abbas told reporters in Cairo after more than one hour of talks with Egyptian President Hosni Mubarak.

"We have made this clear to the Americans: without a halt to settlements, no negotiations."

The Palestinian leader said he also wanted to hear explanations from US officials as to why Washington failed to persuade Israel to freeze settlements in the West Bank and annexed east Jerusalem.

"We want to know what happened exactly between America and Israel," he said, adding he would be meeting Washington's Middle East envoy George Mitchell when he returns to the region next week.

Other Palestinian officials have indicated that indirect talks, including with Mitchell, are likely to be the immediate way forward in Washington's stuttering attempts to secure a peace deal by the end of 2011.

Israeli Foreign Minister Avigdor Lieberman said Thursday he still favoured direct peace talks, despite the dwindling prospects of them resuming any time soon.

"It is very important that the dialogue between us and the Palestinians continues," Lieberman said in Sofia after talks with his Bulgarian counterpart Nikolay Mladenov.

"Nothing can replace direct negotiations. We believe in direct negotiations," he added.

Abbas, apparently still leaving the door open, said a final decision on talks with Israel would be taken in consultation with Arab and Palestinian officials.

"There must be clear references for peace... and we will discuss all that with the follow-up committee, the Palestinian leadership and after that there will be a decision."

Abbas has in the past sought the endorsement of the Arab follow-up committee on the question of resuming the US-brokered direct peace talks with Israel.

Chief Palestinian negotiator Saeb Erakat has said Washington should recognise an independent Palestinian state in response to Israel's refusal to freeze settlement building.

The Palestinians have repeatedly stressed they will not resume direct peace talks unless there is a halt to building in the West Bank as well as a freeze in east Jerusalem, which they consider the capital of their future state.

In his comments on Thursday, Abbas reiterated that a future state should be within the 1967 boundaries -- before the Six-Day June 1967 war when Israel seized the West Bank, east Jerusalem, and the Gaza Strip.

"We will categorically refuse any Israeli presence on Palestinian land after the establishment of a Palestinian state," Abbas said.

Erakat was on Thursday heading to the United States to hold talks with top US officials over the crisis in peace talks.

Separately, Palestinian premier Salam Fayyad was also heading for Washington where he was expected to meet Hillary Clinton ahead of a forum at the Saban Centre for Middle East Policy at which the secretary of state was to speak about a new strategy for advancing the peace process.

Fayyad, who was expected to arrive some time early on Friday, was also expected to address delegates at the forum, alongside Israeli Defence Minister Ehud Barak, who left for Washington overnight.

Asked about Erakat's mission to Washington, Abbas stressed that his chief negotiator will only be meeting Clinton.

"There will be no secret meetings between him and Israeli officials."

The United States is holding out hope a peace deal can still be reached next year, a target it set as the chief broker before direct talks resumed in Washington in September amid fanfare but little optimism from the two sides.

"We're shifting our approach, but are still focused on the goal of a framework agreement within a year... We believe that's still achievable," State Department spokesman PJ Crowley said on Wednesday.

"Obviously a lot of hard work is going have to be done, it's not going to be easy, but we haven't changed our objective" set in August of reaching a peace agreement within 12 months, he said.

Direct talks were re-launched on September 2 after a 20-month hiatus but stalled three weeks later when Israel refused to renew a moratorium on settlement building.