Israel and Palestinians launch peace talks in discord

By Adam Entous and Wafa Amr

JERUSALEM (Reuters) - The first peace talks in seven years between Israel and the Palestinians opened in discord on Wednesday with the Palestinians demanding a halt to settlement building and Israel calling for a crackdown on militants.

The tensions, coming just two weeks after a U.S.-sponsored peace conference in Annapolis, Maryland, highlighted the difficulties ahead for negotiators trying to reach agreement on a Palestinian state before U.S. President George W. Bush leaves office in January 2009.

Wednesday's negotiating session was supposed to lay the ground for detailed talks on final-status issues, including borders and the future of Jerusalem and Palestinian refugees.

Instead, the first round was dominated by Palestinian demands Israel halt plans to build new houses on occupied land near Jerusalem and concerns about Israeli military activity in the Hamas-controlled Gaza Strip, officials on both sides said.

The Palestinians said future negotiating sessions depended on Israel's response on the settlement issue, but they stopped short of threatening to pull out of the talks.

"We want to hear a reply to our demands," said chief negotiator Ahmed Qurie.

Israeli Prime Minister Ehud Olmert's spokesman, Mark Regev, said both sides raised concerns during the 90-minute session. "This process does not have a quick fix," he said. "It's clear the issues on the table will demand ongoing diplomatic efforts."

The United States, which pushed for the talks, said it was important not to make snap judgments after one meeting.

"There will be ups, there will be downs," State Department spokesman Sean McCormack said. "What is important is that they continue to move forward and that the overall trend line is positive."

The talks came one day after Israel carried out one of its biggest raids into Gaza since the Islamist group seized control of the coastal territory in June. Five militants were killed.

Israel's army chief, Lt. Gen. Gabi Ashkenazi, told a security conference in Tel Aviv that a big offensive in Gaza may be inevitable, although he said smaller Israeli strikes were having an impact on militants firing rockets into Israel.

The mayor of Israel's border town of Sderot resigned in protest over the government's failure to halt the rockets.

The negotiating teams met at an Ottoman-era villa overlooking Jerusalem's Old City, with Israel's barrier in the occupied West Bank visible in the distance.

While Israeli officials described the atmosphere as "tense," they said the teams will meet again in about two weeks.

TENSION FLARES