Prime Minister Benjamin Natalyahu has underlined that peace will be possible only if the Palestinian leadership agrees to recognise Israel as a Jewish state, as the two sides prepared for the crucial second round of US-backed direct talks.

Amid widening differences over the formula for peace talks, the hardline Prime Minister warned that the recognition as a Jewish state by the Palestinians is “fundamental” to the success of the peace process — a demand the Palestinians have long rejected.

He told his ministers at the weekly cabinet meeting in Jerusalem on Sunday that just as Israel and he personally had recognised the rights of Palestinians, Israel would demand for its recognition as the national homeland of the Jewish people.

“This is the basis for peace,” he said. Netanyahu stressed that Palestinian refusal to acknowledge Israel’s Jewish status was obstructing progress toward a two-state solution.

“Sadly, I have not heard the Palestinians talk of two states for two nations. They speak of two states – but not two nations,” he emphasised.

“If we can get over the issue of mutual recognition, I hope that next year we will be able to congratulate one another on achieving an agreement for peace,” Netanyahu said.

The ‘direct’ talks between the two sides that kicked off in Washington earlier this month under US mediation have already been marred by a dispute over timetables.

Israel has called its security of paramount concern and is pushing for an initial focus on this matter and a formal end to the decades old conflict, but the Palestinians have demanded debate on the core issues plaguing the conflict right from the outset – right of return of Palestinian refugees, borders and the status of Jerusalem, which is claimed by both sides as their capital.

The demand, which has been repeatedly rejected by the Palestinians, could further complicate the newly relaunched negotiations which go into a second round in Egypt on Monday with the participation of US Secretary of State Hillary Clinton.

The Israeli Premier told his cabinet colleagues that he had telephoned Palestinian President Mahmoud Abbas over the weekend to congratulate him on Eid al-Fitr.

The two leaders are due to meet on Tuesday for a second round of negotiations in the Egyptian resort city of Sharm- el-Sheikh, which will be followed by another the next day in Jerusalem.

The United States, which is mediating the talks, has proposed additional summit on Israeli soil in a push to maintain momentum, fearing constant bickering could hamper the talks from the outset.

Besides the rift over issues to be taken up at the start of the talks, there is also intense friction between the two sides over an Israeli freeze on settlement construction in the West Bank due to expire on 26th September.

Abbas has repeatedly said that he will walk out of talks if the 10-month freeze, which covers all of the West Bank excluding East Jerusalem, is not extended.

US President Barack Obama earlier this week tried to heal tensions by playing down the significance of the 26th September deadline, urging the Palestinian President to appreciate Netanyahu’s difficulty in securing even a temporary freeze.

“A major bone of contention during the course of this month is going to be the potential lapse of the settlement moratorium,” Obama said.

He said the irony is that when Prime Minister Netanyahu put the moratorium in place, the Palestinians were very skeptical.

“It turns out, to Prime Minister Netanyahu’s credit and to the Israeli government’s credit, the settlement moratorium has actually been significant. It has significantly reduced settlement construction in the region,” he pointed out.

He said it was necessary to show the Israeli public that “you are serious and constructive in these talks so that the politics for Prime Minister Netanyahu, if he were to extend the settlements moratorium, would be a little bit easier”.

The Israeli Prime Minister today did not refer to an end of the settlement freeze at the beginning of the cabinet meeting.

But contrary to Netanyahu’s silence on the issue, a number of ministers expressed their opinion on the issue of the West Bank building moratorium.

Left of centre Labour party’s Social Affairs Minister Isaac Herzog referred to the settlement freeze and said that the talks scheduled for Sharm e-Sheikh “are an important step….Brave steps need to be taken during the negotiations, even if it means that a continuation of the settlement freeze.”

In contrast, Interior Minister Eli Yishai of right-wing Shas party claimed that “we need to face the truth and not hide our head in the sand”.

“I am very skeptical. I do not believe that the Palestinians want political negotiations,” Yishai said.

Netanyahu faces a difficult challenge on the issue of continuing freeze over building activities with most of his coalition partners in an overwhelmingly right-wing dominated coalition opposing it vociferously.Despite curfew, some youths pelted stones on a Police Post at PothKhah in Sopore town, 55 kms from Srinagar.

“The miscreants were chased away by the police by using batons. The situation in the area is now under control,” a police spokesman said adding no one was injured in the incident.

Stone pelting incidents were also reported from Boatman Colony in Bemina area, Solina, Soura in the city and Azadgunj in Baramulla town.

A mob pelted stones at a security forces patrol along the Srinagar-Jammu National Highway at Lethpora in Awantipora area of Pulwama district.

Rampaging mobs on Saturday set afire some public properties, including the crime branch office and a police guard post in Hazratbal shrine, as violence marred Eid-ul-Fitr celebrations in Srinagar city.