Israeli and Palestinian negotiators met today in a fresh bid to save their teetering US-brokered peace talks, a Palestinian official said.
Chief Palestinian negotiator Saeb Erakat was meeting in Jerusalem with his Israeli opposite number, Justice Minister Tzipi Livni, and Prime Minister Benjamin Netanyahu's special envoy Yitzhak Molcho, he told AFP.
There was no immediate word from the Israeli side, which was to observe the seven-day Jewish holidays of Passover from sunset tomorrow.
The teams last met last Thursday in a session presided over by US envoy Martin Indyk, who has since returned to Washington for consultations.
But following that meeting the peace process suffered a new blow when Israel said it would freeze the transfer of duties it collects on the Palestinians' behalf, in retaliation for their diplomatic offensive against Israel at the United Nations.
The monthly USD 111 million in taxes collected by Israel represents about two-thirds of the income received by the Palestinian Authority.
Israel was also suspending its participation with the Palestinians in developing a gas field off the Gaza Strip and putting a cap on Palestinian deposits in its banks, the Israeli official said.
A senior Palestinian official, Nabil Shaath, said the Palestinians still had "several options" and would not be deterred.
"Israel's sanctions will not deter Palestinian steps to join international treaties and organisations," he said, quoted by the Palestinian news agency WAFA.
The Israeli reprisals have sparked concern in Washington.
"We've seen these press reports, but we have not seen an official public announcement by the Government of Israel," State Department spokeswoman Jen Psaki briefed reporters on Friday.
"That said, we would regard such a development as unfortunate.
"We believe that the regular transfer of the Palestinian Authority's tax revenues and economic cooperation between Israel and the Palestinian Authority has been beneficial and is important to the well-being of the Palestinian economy."
The talks hit an impasse two weeks ago when Israel refused to release as agreed a group of Palestinian prisoners and the Palestinians retaliated by seeking accession to several international treaties.
