The Palestinian National Authority (PNA) said Tuesday it rejects Israeli calls to move to direct negotiations since proximity talks failed to make progress.

"The Palestinian leaderships doesn't understand the Israeli demands to shift to the face-to-face discussions and insists that Israel must stop settlement activities first," said Saeb Erekat, the chief negotiator.

"There would be direct negotiations" when Israel stops settlements construction and agree that the direct negotiations resume from where they stopped in 2008, he told the Voice of Palestine radio.

The negotiations stopped when Israel waged a three-week offensive in Gaza in 2008 to 2009. Continuation of settlement in the West Bank and East Jerusalem, the territories Palestinians want for future statehood, blocked efforts to resume the peace talks.

In May, the Palestinians accepted a U.S. offer to hold indirect proximity talks with Israel for four months, to agree on the borders of the Palestinian state and other security issues.

However, on Monday, Israel, which froze settlement expansions in the West Bank, approved the building of new homes in East Jerusalem, the controversial city that Israel recognizes as part of its eternal capital while the Palestinians see as their future capital.

"It seems that if Israel was given to decide between settlement and peace, it would select settlement," Erekat said.

The PNA is expecting George Mitchell, the U.S. mediator who leads the proximities, "to see if he carries new suggestions," Erekat said. Mitchell is scheduled to meet Palestinian President Mahmoud Abbas on Saturday.

Meanwhile, Mohammed Dahlan, a member of the Fatah Central Committee, said jumping to direct talks with Israel without achieving tangible progress in the proximities would mean "a political setback and admitting defeat to Netanyahu's plans."

"We will fight not to head for direct negotiations since indirect talks are fruitless up to now," PNA's official news agency Wafa quoted Dahlan as saying.

The Fatah official also said the PNA would approach the Arab League's committee which evaluates and endorsed peace talks with Israel, then, "we will set off to the United Nations Security Council to get an acknowledgment of the pre-1967 borders for the future Palestinian state, even if the United States is going to veto the resolution."