Prime Minister Binyamin Netanyahu warned on Sunday that Israel might take unilateral steps if the Palestinians did not return to the negotiating table. "There is no substitute for negotiations between Israel and the Palestinian Authority and any unilateral attempts outside that framework will unravel the existing agreements between us and could entail unilateral steps by Israel," Netanyahu told a high level gathering of Israeli and American policy-makers at the Saban Forum in Jerusalem. He spoke in response to recent threats by Palestinian officials that they are prepared to ask the United Nations to endorse an independent state, without Israel's consent, because they are losing faith in the peace talks. Earlier in the day, PA President Mahmoud Abbas said, "God willing, we will soon have an independent state with its capital in Jerusalem." He spoke on the anniversary of a 1988 unilateral decision by the Palestinian National Council to declare a Palestinian state. The exchange of warnings of unilateral actions between Israel and the Palestinians comes as the peace process appears deadlocked. The Palestinians have insisted that they will not speak with Israel until it freezes settlement construction, and Israel has said that the talks must resume without preconditions. In light of the stalemate Abbas earlier this month threatened to step down after a presidential election he had set for January 24. But last week, in a move that made it hard for Abbas to quit, Palestinian election officials postponed the vote indefinitely, saying that Hamas's control of the Gaza Strip made it impossible to proceed. In the West Bank on Sunday, officials in Abbas's Fatah Party said they would meet next month to extend his term indefinitely. On Sunday he said, "Palestinian independence has become a tangible reality," Army Radio reported. "Today we are renewing our commitment to the entire Palestinian people - the martyrs, the wounded and the prisoners - to continue the path to victory, the path to a free and independent Palestine," said Abbas. Netanyahu said at the Saban Forum that the true path to a Palestinian state is through direct talks. "I want to begin negotiations immediately. These negotiations should be a good faith effort to reach a final peace agreement," the prime minister said. "My government is prepared to make generous concession in exchange for a genuine peace that protects Israel's security," Netanyahu said. "There is no reason to waste time," he said. Those talks may not be easy, but "there is no other way to bring about change." The prime minister stressed that economic growth in the PA was an important factor in achieving comprehensive peace in the region. "Economic prosperity is not a substitute for peace, but it can help the process... Already now one can see how our steps have contributed greatly in easing the movement of Palestinians within the West Bank. Ramallah is in better condition than other cities," he said. "In times of peace we will see towers, not rockets, shooting out of the ground of the Palestinian Authority," Netanyahu said. "A growing Palestinian economy provides thousands of jobs, helping to dry swamps of poverty and despair, and weakening the forces of terror." The prime minister noted that "there are also actions by the Palestinians themselves" and said he was "impressed" with the improvement of the PA security apparatuses. But chief PA negotiator Saeb Erekat said the Palestinians had decided to turn to the UN Security Council, deeply frustrated that 18 years of on-again, off-again negotiations with Israel had yielded little fruit. "Now is our defining moment. We went into this peace process in order to achieve a two-state solution," he said. "The endgame is to tell the Israelis that now the international community has recognized the two-state solution on the '67 borders." Erekat said the UN initiative would be to create a state in the West Bank, the Gaza Strip and east Jerusalem. Erekat declined to say when the Palestinians would make their appeal to the UN, signaling that the threat may be aimed in large part at putting pressure on Israel. Nimr Hamad, an adviser to Abbas, said the Palestinians "have no intention of rushing" to the Security Council. Hamad said Abbas would travel to Cairo on Wednesday to discuss the plan to go to the UN with Egyptian President Hosni Mubarak. There was no immediate reaction from Security Council members. But Erekat said Russia and unspecified European nations are "on board" with the Palestinian plan. It's expected that the US ,which has endorsed a negotiated solution, would veto such a move by the Palestinians. Speaking in Ramallah at a press event organized by the Saban Forum, US Rep. Howard Berman (D-California), who chairs the House Foreign Affairs Committee, called on both the Palestinians and the Israelis to begin speaking to each other. "For the goals of statehood and the end of the occupation it is critical that the negotiations resume, and we fervently urge the parties to take the steps necessary to get those negotiations going again," Berman said. US Senator Joseph Lieberman (Independent-Connecticut) said at that same event, "No one is talking about unilateral statehood." Still, he expressed support for PA Prime Minister Salaam Fayad's two-year plan to prepare the ground for Palestinian statehood. Lieberman told Fayad that the PA would become a more likely partner for Israel in negotiations if its institutions were more robust. "I know some people are concerned that this is unilateral," he said, referring to the development plan. "But it seems to me that it is unilateral in a healthy sense of self-development." "It can not help but facilitate the hope that we all have of progress in the peace process with Israel," he said. Speaking at the same press event with the Americans, Fayad said his development efforts are separate from Erekat's independence plan at the UN. He said his government's goal is "getting ready for statehood," while the PLO would decide when to declare independence. Earlier at the weekly cabinet meeting, Netanyahu said the US understood that Israel has pushed to move forward on the peace process while the Palestinians have done what they could to avoid moving forward. Speaking of his meeting with US President Barack Obama in Washington last week, Netanyahu said, "I told the president that peace must be our goal and we will try to get there. This Israeli government can do it and the American government can help, but there is a question about the Palestinian side." He added, "We have an interested in negotiations with the Palestinians. We need to take steps to prove to them that it is in their interest to take steps as well." Defense Minister Ehud Barak (Labor) warned, "We need to make it clear to the Palestinians that cooperation is preferable and that they have what to lose; our cooperation." Still, he said that a way must be found to make peace with the Palestinians. "Controlling another nation for a fifth generation is unacceptable to the world in the 21st century. There are different ways of proceeding. If there won't be diplomatic progress, the appetite for the one-state solution will strengthen." National Infrastructures Minister Uzi Landau (Israel Beiteinu) criticized the Palestinians for seeking unilateral steps. "The Palestinians are showing chutzpah with their hostile initiative intended to torpedo chances of peace. If the Palestinians unilaterally declare a state, we should annex Area C in the West Bank, Landau said. AP contributed to this report.