"To reach peace, we have to discuss the issues that are truly delaying peace," Netanyahu said, mentioning the core issues of " security arrangements, refugees, a Palestinian recognition of the Jewish State and many other issues."

The U.S. also wants Israel to discuss the borders of a future Palestinian state and the status of Jerusalem.

Mitchell said Tuesday after meeting with PNA President Mahmoud Abbas in Ramallah that his country would continue efforts to revive the Israeli-Palestinian peace talks despite difficulties.

"There are still many difficulties and obstacles in the way but we are determined to persevere in our efforts to see independent and viable state of Palestine," Mitchell told reporters.

Saeb Erekat, the chief Palestinian negotiator, said Abbas had told Mitchell that the Palestinians are sticking to the demand that Israel must freeze Jewish settlement building before resuming the negotiations.

Despite the U.S. administration's adoption of a balanced approach in a bid to move the peace process forward, members of Congress are warning that American funding of the PNA could very well cease if it continues its efforts to advance a unilateral declaration of statehood.

California Democrat Howard Berman, chairman of the House Foreign Affairs Committee, told The Jerusalem Post that "pursuing a non-negotiated path to statehood is a fool's errand. Palestinians want a state, not a declaration."

"Their only way to achieve that is through direct negotiations with Israel. If they [the Palestinians] try to circumvent negotiations, they'll lose the support of a lot of people like me, and it will jeopardize their foreign aid as well," the daily on Tuesday quoted Berman as saying.

Berman's concerns are reportedly shared by other members of Congress, to be led by the Republicans when they assume control in January.

A possible unilateral Palestinian declaration of statehood has recently become a focus of the international community, following Brazil and Argentina's declared recognition of an independent Palestinian state within the pre-1967 lines. Uruguay has followed suit, saying it too will recognize Palestine as a political entity in 2011.