The settlement freeze "must include Jerusalem", Abbas said © AFP Khaled Desouki

CAIRO (AFP) - Palestinian president Mahmud Abbas said on Sunday that he will not return to the negotiating table with Israel without a settlement freeze that includes annexed Arab east Jerusalem.

The Palestinian leader also hit out at US efforts to persuade Israel to agree to a more limited freeze applying only to the rest of the occupied West Bank in return for a raft of political and security benefits, saying he wanted to have nothing to do with such deal-making.

"If it does not encompass Jerusalem, in other words if there is not a complete freeze on settlement in all the Palestinian territories including Jerusalem, we will not accept it," Abbas told reporters after talks with Egyptian President Hosni Mubarak.

"If Israel wants to return to its settlement activities, then we can't go on. A settlement freeze must include all of the Palestinian territories and above all Jerusalem," Abbas said.

Direct peace talks between Israel and the Palestinians resumed on September 2 but collapsed three weeks later with the expiry of a 10-month Israeli freeze on settlement building in the West Bank.

Although that freeze did not apply directly to east Jerusalem, Israeli Prime Minister Benjamin Netanyahu quietly held off approving projects there for most of its duration to avoid the political fallout.

But faced with opposition from hardliners in his cabinet to any new settlement freeze, Netanyahu has said repeatedly that no restrictions will apply to construction in east Jerusalem.

In talks last week, US Secretary of State Hillary Clinton put together a package of incentives to get Netanyahu to accept a one-off 90-day freeze, including an additional 20 F-35 fighter jets, worth three billion dollars, and a pledge to block any international efforts to impose a peace deal on Israel.

But Abbas spoke out against the US diplomatic efforts.

"We told the Americans that we wanted nothing to do with their deal-making. We reject the idea of linking these bargains to the resumption of negotiations," he said.

"If the issue is a matter of weapons for one side or another, then we don't accept it."

Abbas said there were still no firm proposals from Washington.

"So far nothing official has come out of the US administration, either to us or to the Israelis, that we can comment on," he said.

After talks with Abbas on Saturday, Arab League chief Amr Mussa said that as soon as the Palestinians received the US response, the bloc's follow-up committee would hold an emergency meeting to discuss its next step.

The League has given Washington until the end of this month to rescue the peace talks.

© AFP/File Gali Tibbon - The US is believed to have offered Israel a generous package in exchange for a renewed partial freeze on settlements

Abbas also held talks on Saturday with Egyptian intelligence chief Omar Suleiman, who has been brokering reconciliation talks between the Western-backed Palestinian leader's Fatah faction and the Islamist Hamas movement which controls Gaza.

"So far we have not reached an agreement with Hamas," Abbas said, accusing the movement of going back on some of its earlier bargaining positions.

"Despite all that... we will continue to hold a dialogue with Hamas at all levels until we restore Palestinian national unity," he added.

The two factions have been at loggerheads since Hamas seized Gaza in June 2007, ousting forces loyal to the Palestinian president and effectively restricting his authority to the Israeli-occupied West Bank.