US envoy George Mitchell is scheduled to return for a seventh round of proximity talks next week, as the issue of whether Israel will extend its 10-month housing-start moratorium is fast becoming a major stumbling block on the road to direct talks.

Israel Radio reported that Palestinian Authority President Mahmoud Abbas, at a meeting of the Fatah Revolutionary Council in Ramallah on Wednesday, said he had assurances from US President Barack Obama that if the PA entered the direct negotiations, Israel would not build one house on Palestinian land.

Foreign Minister Avigdor Lieberman, meanwhile, said during a meeting with visiting Greek Prime Minister George Papandreou that while Israel was interested in direct talks with the Palestinians, a continuation of the settlement moratorium was both “impossible and unreasonable.”

Papandreou, the first Greek prime minister to visit Israel since 1992, went to Ramallah and a meeting with Abbas soon after his meeting with Lieberman, and there, according to Israel Radio, was told that direct talks with Israel would begin only if construction in the settlements ceased, and that Israel agreed the future borders of a Palestinian state would be based on the June 4, 1967 lines.

State Department spokesman P.J. Crowley seemed to reject the latter demand, saying at his daily press conference on Wednesday that “our message to both parties is, let’s get to direct negotiations as quickly as possible, where, in fact, we can address the fundamental issues and the process, including borders. These are issues that we think can only be resolved within the context of direct negotiations...Ultimately, in order to address the concerns that we know that both parties have – refugees, security, Jerusalem, borders – those are going to be resolved in the direct negotiations themselves.”

An Israeli government official said in response to Abbas’s demands that Israel wanted to return to direct talks soon, and hoped that Abbas was “not just looking for an excuse to avoid direct talks. Ultimately if he wants to find an excuse not to negotiate, he can always find one.”

The official said that the direct talks increasingly seemed like a receding horizon.

“Every time we get close, the Palestinians create a new obstacle to prevent their resumption,” the official said.

One diplomatic source said that it seemed highly unlikely the US would have promised Abbas that if he entered direct talks all construction in the settlements, and in east Jerusalem, would cease, since the Americans would not promise something they could not deliver.

Prime Minister Binyamin Netanyahu, in a statement he made upon greeting Papandreou, said Israel wanted to enter direct peace negotiations “not really to negotiate, but to seek a conclusion of a historic peace agreement.”

Following the meeting with Papandreou, Netanyahu’s office released a statement saying it had been agreed to “significantly tighten the relations in a variety of bilateral spheres.”

Papandreou invited Netanyahu to Greece for a reciprocal meeting, the statement said.

Israeli-Greek ties have warmed considerably over recent months, against the backdrop of the deterioration in Israeli-Turkish ties.

“Today, modern Greece and modern Israel are pillars of stability in the Eastern Mediterranean, and I believe great partners in the quest for peace – the peace between us and our Palestinian neighbors and the peace in the entire region,” Netanyahu said when greeting Papandreou.

“So I welcome the opportunity of your visit to explore how to do this – how to deepen the relationship and the friendship between our two countries, and how to strengthen all our ties, beginning with economic ties,” he said, speaking of Greece – long considered one of the least friendly countries toward Israel in the EU – in a manner not heard in Jerusalem in years.

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