Foreign Minister Avigdor Lieberman said Tuesday that a planned Palestinian prisoner release will not happen as long as Palestinians pursue their bid to join UN agencies.
Lieberman accused the Palestinians of breaking the terms of the US-brokered peace talks, and the Palestinians should "pay a price" for this.
Under the terms of renewed talks, Israel had promised to release 104 long-held Palestinian prisoners in four groups, while the Palestinians said they would suspend a campaign to sign up the "state of Palestine" for various UN agencies.
But as the talks stalled last month, Israel failed to release the fourth group of prisoners on time, and
the Palestinians then signed letters of accession for 15 international conventions.
Lieberman described the Palestinian move as highly "provocative."
Meanwhile, Israeli and Palestinian negotiators met for a second time in two days Monday night, as US mediation efforts to stop prevent the collapse of ongoing peace talks showed little signs of progress.
Israeli negotiator Tzipi Livni and her Palestinian counterpart Saeb Erekat held a "serious and constructive" meeting with US special envoy Martin Indyk on Sunday night "to discuss ways to overcome the crisis in the talks" and met again on Monday, U.S. State Department spokeswoman Jen Psaki told reporters.
"Gaps remain but both sides are committed to narrow the gaps," she said of Monday's meeting.
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According to Army Radio, Lieberman, who is currently in the US, was to meet Wednesday with Secretary of State John Kerry, while Kerry was due to meet with US President Barack Obama on Tuesday, with the state of the peace efforts high on the agenda.
President Shimon Peres told Army Radio on Tuesday morning that there was still a chance to save the talks. "We shouldn't say kaddish (Jewish prayer for mourners), it is vital to do all we can to safeguard the continuation of the negotiations," he said, shortly before departing for a visit to China.
The US-brokered talks plunged into crisis last week after Israel, demanding a Palestinian commitment to continue talking after the end of the month, failed to carry out a promised release of about two dozen Palestinian prisoners.
Palestinian President Mahmoud Abbas responded by signing 15 global treaties, including the Geneva Conventions on the conduct of war and occupations, on behalf of the State of Palestine, a defiant move that surprised Washington and angered Israel.
Kerry signalled Friday he may scale back his intense mediating efforts due to "unhelpful actions" by Israel and the Palestinians, saying it was time for a "reality check" and Washington would re-evaluate its role.
Kerry's comments were a clear acknowledgement that the talks have been going poorly, a signal that there were limits to US patience and a tactical manoeuvre to force the two sides to decide whether they want to continue negotiations.
Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies think tank in Washington, said he believed the administration was weighing how to mitigate the risks of a collapse, although he stressed the peace process could still be salvaged.
"It would be irresponsible not to think through what the consequences of a collapse would be, but it's not clear that a collapse is what's going to happen," he said. "Arguably the administration's strategy all along has been to keep things moving just enough so that they don't collapse and it's far from clear that that strategy has completely run its course."
The wrangling attracted little interest on the streets, where Israelis and Palestinians have become inured to decades of conflict and deadlock.
Fewer than 20 MKs showed up for a special debate on the peace process on Monday in the 120-seat Knesset.
"We're all too busy worrying about how to pay bills. Prices have risen and there are very few jobs," said Tareq Younes, a Palestinian barber from a village near the West Bank city of Ramallah.
The peace talks, which began in July, have stalled over Palestinian opposition to Israel's demand that it be recognised as a Jewish state, and over settlements built on land Palestinians seek for a country of their own.
An Israeli official described the Sunday meeting as "business-like" without elaborating. A Palestinian official said his side had submitted conditions for extending the talks beyond the original April 29 deadline for a peace deal.
Palestinians have said the signing of the international treaties last week was a natural progression after the UN General Assembly's de facto recognition of a Palestinian state in 2012.
Prime Minister Benjamin Netanyahu, at a cabinet meeting on Sunday, promised unspecified retaliatory measures in response to the signings.
A senior official in Abbas' Fatah party said the Palestinians wanted a written commitment from Netanyahu's government recognising a Palestinian state within all of the territory in the West Bank and Gaza Strip that Israel captured in the 1967 Six-Day War, with East Jerusalem as its capital.
Israel has described those West Bank borders as indefensible and considers East Jerusalem as part of its capital, a claim that is not recognised internationally. Israel pulled out of the Gaza Strip, now ruled by Hamas Islamists and the launch pad for multiple rocket attacks on Israeli communities, in 2005.
In addition, the Fatah official said, Palestinians were demanding a cessation of settlement activity and a prisoner release.
Palestinians fear settlements will deny them a viable state and have condemned a series of Israeli construction projects announced while talks have been under way.
A monthly peace index issued by the Israel Democracy Institute and Tel Aviv University, last published in March, found 69 percent of Israelis "somewhat don't believe" or "don't believe at all" that the negotiations will lead to peace.
A poll conducted last month in the West Bank and Gaza Strip by the Palestinian Center for Policy and Research showed that about three-quarters of those surveyed believed chances for establishing a Palestinian state in the next five years were "slim or non-existent".