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George Mitchell reiterated Washington's support for a Palestinian state alongside Israel, in talks with the Israeli president and foreign minister.
Foreign Minister Avigdor Lieberman said the diplomatic process was at a "dead end" and a new approach was needed.
Mr Mitchell is due to have dinner with Mr Netanyahu later on Thursday.
He will then travel to the West Bank for talks with Palestinian leaders on Friday.
The US envoy has arrived in Israel to a changed political landscape, says the BBC's Tim Franks in Jerusalem.
When Binyamin Netanyahu finally announced the make-up of his coalition government on 30 March, two of the most important posts went to figures from opposing ends of the political spectrum – the Labour leader Ehud Barak retained his job as minister of defence, and the leader of the far-right Yisrael Beiteinu (“Israeli Home”) party, Avigdor Lieberman, became foreign minister. Such a broad coalition, born of Israel’s system of proportional representation, will generate a stalemate in the domestic arena, and it is hard to see it making much progress in foreign affairs.
After months of relative passivity, Egypt effectively declared war in mid-April on Iranian-backed terrorist groups operating in its backyard, executing an unprecedented wave of arrests of alleged terrorists, smugglers and arms-makers linked to Hezbollah and Hamas.
The US president Barack Obama’s Middle East envoy today told Israel’s ultranationalist foreign minister, Avigdor Lieberman, that Washington wants to see the creation of a Palestinian state.
With Mr Libeerman at his side, George Mitchell told reporters: “I reiterated to the foreign minister that US policy favours, with respect to the Israeli-Palestinian conflict, a two-state solution which will have a Palestinian state living in peace alongside the Jewish state of Israel.
“We look forward also to efforts to achieving comprehensive peace throughout the region.”
The US special envoy to the Middle East is meeting senior Israeli officials in an attempt to kickstart the stalled Israeli-Palestinian peace process.
George Mitchell met Avigdor Lieberman, Israel's foreign minister, on Thursday and will meet Benyamin Netanyahu, the country's prime minister, later in the day.
Mitchell is also expected to discuss progress on peace negotiations with Tzipi Livni, leader of the opposition Kadima party.
Shortly after arriving in the country on Wednesday evening, Mitchell met Ehud Barak, Israel's defence minister.
Commitment urged
George Mitchell, the US envoy to the region with a special brief to kick-start meaningful talks between Palestinians and Israelis, has his work cut out for him.
If there was any hope for negotiations between Fatah and Hamas in Cairo to reach an agreement that would end the state of division between the Palestinians, such a hope has become less likely today as a result of the repercussions of the exchange of smear campaigns between the Egyptian government and Hezbollah, on the background of the cell arrested by the Egyptians, who claim that it had been planning activities that pose a threat to Egypt's security.
US President Barack Obama's maiden venture into foreign policy earlier this month earned him high marks from many, but also ruffled the feathers of icons of the American neoconservative movement, which had its heyday during the just-concluded tenure of George W. Bush.
Wherever he went on his first visit overseas, he chose to knock on doors gently and warmly, particularly in Turkey, where he declared that the United States is not at war with the Muslim world.
Last week the judicial authorities in Cairo announced that they had arrested members of a Hizbollah cell and accused the Lebanese Shiite party of threatening Egypt’s national security. In a televised address, Hezbollah’s secretary general, Hassan Nasrallah, admitted that one of those in custody was a party member working to rearm Palestinians in Gaza. However, he added, no one was trying to undermine Egyptian security. Both accounts told us little about what is really going on.
Foreign Minister Avigdor Lieberman on Thursday told special U.S. envoy George Mitchell that a different approach was needed to solve the Middle East conflict, because that of past Israeli governments had failed.
"New ideas" must be found, because the path taken by previous governments did not lead to "good places, to say the least," Lieberman told Mitchell, who arrived in Israel Wednesday night.
This was Mitchell's third round of talks in Jerusalem and Ramallah since his appointment, and the first during the tenure of Prime Minister Benjamin Netanyahu.
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The West Bank is returning to center stage amid expectations that the new U.S. administration will do more to push the diplomatic process between Israel and the Palestinians forward. The United States faces the old vision of two states living side by side and enjoying independence, security and prosperity. Unfortunately, this vision relies on false assumptions about the West Bank's development potential.
The separation barrier will receive its largest piece of graffiti yet when Dutch and Palestinian activists scrawl on it a 2,000-word letter by a South African scholar arguing that "Israeli apartheid" is "far more brutal" than Pretoria's was.
The letter by Farid Esack will be put on the eastern face of the wall this week by activists belonging to Sendamessage - a Dutch group that collects money over the Internet for painting messages to protest against the barrier Israel is building along the West Bank.
Members of the Hizbullah cell uncovered in Egypt planned to carry out terror attacks inside Israel, Egyptian daily Almasry Alyoum reported on Thursday.
According to the report, two of the cell's members are Fatah operatives, who confessed to having planned to enter Israel and carry out massive suicide attacks, "maybe even in Tel Aviv".
Sources close to the investigation told the newspaper that two Fatah members, Muhammad Ramadan Barakeh and Nidal Fathi Hassan were arrested under suspicion of ties with the Hizbullah cell.
U.S. special envoy to the Middle East George Mitchell arrived last night in Israel for the third round of talks in Jerusalem and Ramallah since his appointment, and the first during the tenure of Prime Minister Benjamin Netanyahu.
Mitchell is expected to ask the prime minister during their meeting today to clarify Israel's position regarding the resumption of negotiations with the Palestinians and Syria.
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[5] http://www.acpus.org/donate_online
[6] http://news.bbc.co.uk/2/hi/middle_east/8001497.stm
[7] http://www.newstatesman.com/middle-east/2009/04/palestinian-state-israel
[8] http://www.forward.com/articles/104854/
[9] http://www.thenational.ae/article/20090416/FOREIGN/41069032/1133
[10] http://english.aljazeera.net/news/middleeast/2009/04/200941663640454228.html
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[14] http://www.thenational.ae/article/20090416/OPINION/332937630/1080
[15] http://www.haaretz.com/hasen/spages/1078611.html
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[18] http://www.ynetnews.com/articles/0,7340,L-3702190,00.html
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