US President Barack Obama has insisted that Israel completely halts the expansion of settlements on occupied Palestinian land as it seeks to jump-start the peace talks that were suspended during Israel’s invasion of Gaza at the turn of the year.

Israel Prime Minister Benjamin Netanyahu has rejected a complete freeze, but agreed not to issue any new tenders until early 2010, in what Washington called a step in the right direction but critics slammed as falling short of a complete halt.

Israel and its main ally are engaged in talks to find a compromise ahead of the UN general assembly meeting in New York this month, with Israeli officials due to meet with US Middle East envoy George Mitchell in the US later this week.

According to Israel media reports, one possible compromise includes Israel agreeing to a temporary freeze, with projects already underway allowed to continue.

The Palestinians, who have demanded a complete freeze before resuming the peace talks, have repeatedly rejected any partial or limited stop to the continued expansion of the settlements.

Jewish settlements in the occupied West Bank and annexed east Jerusalem are among the main obstacles in the decades-old Israeli-Palestinian conflict.

Shaath also reiterated that the Palestinians will not recognise Israel as a legitimate Jewish state, as demanded by Netanyahu as part of any final peace deal.