Obama wants "immediate" Mideast talks: Mitchell

By Wojciech Moskwa

OSLO (Reuters) - U.S. President Barack Obama wants "immediate" talks between the Palestinians and Israel to forge a comprehensive Middle East peace agreement, U.S. envoy George Mitchell said on Monday.

Mitchell, who is en route to the Middle East, said the aim of such talks was "a comprehensive peace and normalization of relations" between Israel and its neighbors, which would also serve "the security interests of the United States."

"The president has told me to exert all efforts to create the circumstance when the parties can begin immediate discussions," Mitchell told reporters at the start of a Palestinian donors' conference in the Norwegian capital.

Mitchell said the purpose of the donors' meeting was to "provide support for the Palestinian authority" and pave the way for a two-state solution with Israel.

"It's important that there is a building of institutions and governmental capacity so that at an early time there can be an independent and viable Palestinian state," Mitchell said.

Israeli Prime Minister Benjamin Netanyahu has said he is ready to meet Palestinian President Mahmoud Abbas and pursue a three-track peace process focusing on economic, security and political issues.

Palestinians have rejected his proposed shift of focus away from territorial issues, whose complexity, Netanyahu has said, has frustrated U.S.-backed attempts to reach a final peace deal.

Abbas has said renewed negotiations would be pointless unless Netanyahu first endorsed the U.S.-backed goal of Palestinian statehood and halted, as Obama has demanded, the expansion of Jewish settlements in the occupied West Bank.

Under U.S. pressure to soften his positions, Netanyahu plans to spell out his peace policies in a major speech later in June.

"NO HUMANITARIAN PROJECT"

Norway's Foreign Minister Jonas Gahr Stoere said recent political uncertainty regarding any Middle East peace deal had hurt fund-raising efforts for the Palestinians.

"We, the donor community, are not into this as a humanitarian project but a political project," said Stoere who chairs the donors' group for Norway.

A World Bank report on the Palestinian economy issued at the donors' meeting said foreign support remained "indispensable" to allow the Palestinian Authority to "provide basic services" and praised "good" budget management by Abbas and his team.

It said improvements in security in the West Bank had not yet translated into increases in private-sector activity and that the large sums of foreign aid pledged to the Palestinians after Israel's military strike on Gaza had not made any "tangible progress" toward the reconstruction of Gaza.

(Additional reporting by Jeffrey Heller in Jerusalem, Editing by Jon Hemming)