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Egypt's foreign minister says East Jerusalem must be included in a freeze of Israeli settlement activity before Middle East peace talks can restart.

Ahmed Aboul-Gheit told reporters in Stockholm on Friday that Jerusalem is Arab "and it will continue to be so."

He said the Arab world expects the area to be included in a moratorium on Israeli settlements.
    
The Obama administration has hinted it may be backing down on its insistence that Israel halt all settlement activity as a condition for restarting peace talks with the Palestinians.

U.S. officials have denied Israeli media reports that Washington has agreed to leave East Jerusalem out of the agreement and settle for a nine- to 12-month freeze in the West Bank.

A State Department spokesman said on Friday that the Obama administration will be flexible on pre-conditions for all parties involved in Middle East peace negotiations.

"We put forward our ideas, publicly and privately, about what it will take for negotiations to be restarted, but ultimately it'll be up to the parties themselves, with our help, to determine whether that threshold has been met," spokesman P.J. Crowley said, adding that the U.S. position on an Israeli settlement freeze remains unchanged.

"Ultimately," he added, "this is not a process by which the United States will impose conditions on Israel, on the Palestinian Authority, on other countries.

"We're asking them to meet their commitments under the Roadmap, but most importantly, we're asking them what they're prepared to do and to demonstrate the steps that that they are prepared to take that allow us to have confidence that these negotiations can be restarted," he said.

The White House said Thursday it had nothing to add to Crowley's comments.

The administration's special Mideast envoy, George Mitchell, has been pressing Israel, the Palestinians and neighboring Arab nations to take specific confidence-building measures to lay the groundwork for a resumption in peace negotiations. The administration wants to have President Barack Obama announce a breakthrough in the third week of September at or on the sidelines of the United Nations General Assembly.

Getting Arab buy-in on such a deal will be difficult, particularly since Palestinian President Mahmoud Abbas has refused to resume negotiations with Israel until there is a full freeze on settlements. U.S. officials said Thursday that they will continue to press Israel for as broad a suspension as possible.

But they also acknowledged that a compromise from the previous hard stance on settlements laid out by Secretary of State Hillary Rodham Clinton may be necessary due to the equally firm line taken by Israeli Prime Minister Benjamin Netanyahu in recent talks with Mitchell.

Clinton said in May that Israel needed to apply a freeze on all new settlement construction, including so-called natural growth in existing projects in the West Bank. It would also apply to activity in east Jerusalem, notably the eviction of Palestinian families and demolition of Palestinian homes.

Mitchell met Netanyahu in London on Wednesday for talks that both sides said made unspecified good progress but did not produce an agreement on a freeze. Mitchell will hold follow-up talks next week with an Israeli delegation in the United States, although officials downplayed chances for a breakthrough.

Crowley and other U.S. officials denied Israeli media reports that Mitchell had agreed to leave East Jerusalem out of the agreement and settle for a nine- to 12-month freeze in the West Bank only that would also allow the completion of projects already under construction.

However, diplomats familiar with talks say that the administration has signaled it might be able to accept an understanding on East Jerusalem that would entail an Israeli promise not to take any provocative actions there.

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