The New Nation - Internet Edition

AP, London

Palestinian Prime Minister Salam Fayyad warned Friday that peace talks could collapse unless Israel changes course and accepts a more conciliatory approach in negotiations.

Fayyad, in London for diplomatic talks, said Israel has not complied with any of the obligations set out at the U.S.-backed peace conference in Annapolis, Md., late last year.

"Israel has failed to meet any of its obligations from the road map, including a freeze in settlement activity," he said.

"Unless that changes, the political process is being stripped of its meaning."

Fayyad gave a highly pessimistic progress report after meeting with Israeli Foreign Minister Tzipi Livni.

He said the Palestinian government had met its commitments by reforming its financial sector and praised the donor community for providing additional money desperately needed by Palestinian authorities.

In response, Israeli diplomats released remarks that Livni made in private meetings with Fayyad and other leaders earlier in the day.

They said she had told Fayyad that 60 road blocks, one major checkpoint, and other impediments to Palestinian freedom of movement had been removed, and that an additional 5,000 work permits have been granted to help Palestinians seeking work inside Israel.

However, the United Nations says there are more than 500 obstacles impeding movement in the West Bank, including gates, checkpoints and dirt mounds blocking passages. The 60 impediments Livni referred to are mostly dirt mounds, the removal of which has had little significance.

"Many of these measures involve significant security risks for Israel," she said, according to the released remarks. "We expect the (Palestinian Authority) to live up to its obligations in order to ensure that these steps will not be exploited by terrorists and endanger further progress."

But she said Israel needs assurances that the Palestinians will actively fight terrorism before it takes any further steps.

Fayyad said the Palestinian Authority needed roughly $1 billion to meet its obligations for the second half of this year.

But he said Israel had refused to take steps that would allow normal economic activity in the West Bank and Gaza Strip.

The remarks came after the Middle East peace Quartet - the U.S., Russia, the European Union and the United Nations - urged Israel to cease all settlement activity in the West Bank. The diplomats called for more negotiations in the Israeli-Palestinian conflict.

There were no signs of a breakthrough, but Secretary of State Condoleezza Rice said an agreement on the creation of an independent Palestinian state remains possible during President Bush's waning days in office.

"It's hard work and it's labor intensive and I know there's skepticism, but I think they do have a chance to get an agreement by the end of the year and that's what we're going to work for every day," she said.

Rice cited Northern Ireland as an example of a conflict that seemed intractable until just before peace was achieved.