JERUSALEM – President Barack Obama's Middle East envoy pressed the two-state solution to sceptical officials in Israel on Thursday, while hawkish new Prime Minister Benjamin Netanyahu demanded that the Palestinians recognise Israel as a Jewish state.
"US policy favours, with the respect to the Israeli-Palestinian conflict, a two-state solution," George Mitchell told reporters after talks with Foreign Minister Avigdor Lieberman, who has refused to endorse the US-sponsored peace process between Israel and the Palestinians.
In response, Lieberman said that "the peace process has reached a dead end" and that "the new (Israeli) government will have to formulate new ideas and approaches," a statement from his office said.
"The traditional approach has so far led to no solutions or results," Lieberman said.
Netanyahu and Mitchell met later in Tel Aviv.
"Israel expects the Palestinians to recognise the state of Israel as the state of the Jewish people," the premier's office said he told Mitchell.
The Palestinian Authority has rejected such a demand in the past, saying it recognises Israel within the country's borders before the 1967 Middle East war when the Israelis seized the West Bank and Gaza Strip.
Recognition of a Jewish state would for the Palestinians amount to abandoning the right to return of Palestinian refugees.
Lieberman's comments highlighted the risk Israel could be on a collision course with its most important ally, as Washington insists on the principle of a Palestinian state and Netanyahu refuses to endorse the plan.
Mitchell flew in to Israel late on Wednesday on his first trip to the region since Netanyahu became the head of a largely right-wing cabinet, sparking concern over the fate of the troubled peace talks.
Underscoring the divide with Washington, Interior Minister Eli Yishai told reporters that, "In the present circumstances, one has to work not for two states for two people, but for two economies for two people."
"Mr. Mitchell knows that imposing the region to a virtual dialogue can have inverse results," he said.
Lieberman later told his visiting Spanish counterpart Miguel Angel Moratinos that the government was still formulating its policies, which will be based on the principles of halting rocket fire from the Hamas-ruled Gaza Strip, ending Iran's controversial nuclear programme and improving the Palestinian economy, his office said.
Netanyahu says that the economy in the occupied West Bank must improve before any other steps are taken in the faltering Middle East peace process.
Lieberman -- slammed by critics as a "racist" for his anti-Arab diatribes -- has also sparked concerns by declaring when he assumed office that the new cabinet was not bound by the US-backed 2007 agreement to relaunch talks with the Palestinians.
Israel has committed itself to the principle of a Palestinian state under the 2003 international "roadmap" for peace, which included a series of steps for Israelis and Palestinians to follow, eventually resulting in negotiations over core issues and the creation of a Palestinian state.
The plan has made little progress since its launch by the Middle East Quartet -- the European Union, Russia, the United Nations and the United States.
Under a deal reached with Palestinians in Annapolis, Maryland, the two sides agreed to jump to the final phase of the roadmap and resume negotiations on final status issues while implementing the other stages of the plan.
Mitchell was to travel to Ramallah in the occupied West Bank on Friday to meet Palestinian president Mahmud Abbas, who has insisted that the new Israeli cabinet commit itself to a two-state solution before the two sides can resume talks.
Mitchell, a former US senator, played a key role in reaching the 1998 Good Friday accords that ended decades of violence in Northern Ireland.
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