By Joseph Nasr
JERUSALEM (Reuters) - Israeli and Palestinian leaders demanded Thursday that the other shift negotiating positions that risk thwarting President Barack Obama's demand that the two sides resume peace talks soon.
In media interviews at the United Nations in New York, where they met Obama Tuesday, Israeli Prime Minister Benjamin Netanyahu said Palestinian President Mahmoud Abbas must end his refusal to recognize Israel explicitly as a Jewish state and Abbas said Israel must discuss dividing control of Jerusalem.
Netanyahu's government was a "real problem" for even making a start on negotiations, far less making a deal, the Palestinian leader, also known as Abu Mazen, told the Al-Hayat newspaper.
Netanyahu told Israel Radio: "I told Abu Mazen I believe peace hinges first on his readiness to stand before his people and say, 'We ... are committed to recognizing Israel as the nation state of the Jewish people'."
"I will not drop this subject and other important issues under any final peace agreement," Netanyahu said.
Abbas has rejected that demand on the grounds it did not figure in interim agreements and would, Palestinian officials argue, prejudge the outcome of negotiations on the fate of Palestinian refugees from what became Israel in 1948.
"The Netanyahu government is a real problem because we do not have a common ground for discussion," Abbas told al-Hayat.
"He says settlement will continue and Jerusalem is not for discussion ... and he also says the refugees are not for discussion so what shall we discuss and how can we agree?"
The Palestinians say Israel should meet commitments under a 2003 interim peace accord to halt settlement activity in the occupied West Bank and East Jerusalem before talks resume.
Obama called Tuesday for "restraint" in settlement. That seemed softer than a previous U.S. demand, rejected by Netanyahu, for a "freeze" in construction, and reflected a U.S. approach to push hard for negotiations without preconditions.
However, a major sticking point remains what exactly should be on the table in talks, which were suspended in December.
The Palestinians say understandings reached with previous Israeli governments are valid but Netanyahu, who took office in March, refuses to commit to past undertakings on thorny issues like borders and sharing sovereignty over Jerusalem.
Netanyahu's government says it is keen to talk on bolstering security and prosperity in the West Bank but sees no point in renewing talks yet on "core issues" like Jerusalem and refugees -- partly because Palestinian demands are unchanged, and partly because Abbas has no control over Hamas Islamist-ruled Gaza.
Abbas is due to address the U.N. General Assembly Friday.
Netanyahu will speak there later Thursday and Israeli officials say his speech will focus on Iran's nuclear program, which Israel says is a threat to its existence.
(Editing by Alastair Macdonald)
