Israeli and Palestinian negotiators met on Sunday in a fresh bid to save their teetering US-brokered peace talks, a Palestinian official said.

Chief Palestinian negotiator Saeb Erakat met in Jerusalem with his Israeli opposite number, Justice Minister Tzipi Livni, and Prime Minister Benjamin Netanyahu’s special envoy Yitzhak Molcho, he told AFP.

There was no immediate word from the Israeli side, which observes the seven-day Jewish holidays of Passover from sunset on Monday.

A Palestinian source close to the talks said a new meeting between the negotiators was set for Tuesday or Wednesday evening, with US envoy Martin Indyk due to attend.

Indyk, who presided over a meeting last Thursday, has since returned to Washington for consultations but is due to return on Tuesday, the source added.

The peace process has since last week suffered a new blow when Israel said it would freeze the transfer of duties it collects on the Palestinians’ behalf, in retaliation for their diplomatic offensive against Israel at the United Nations.

The monthly 80 million euros ($111 million) in taxes collected by Israel represents about two-thirds of the Palestinian Authority’s income.

Israel also reportedly plans to suspend its participation with the Palestinians in developing a gas field off the Gaza Strip and to put a cap on Palestinian deposits in its banks.

Foreign Minister Avigdor Lieberman, in a meeting with ambassadors posted in Tel Aviv on Sunday, blamed the Palestinians for the rapid deterioration in the peace process.

Foreign Minister Avigdor Liberman. (photo credit: FLASH90)

Foreign Minister Avigdor Liberman. (photo credit: FLASH90)

“We were very close to an agreement with the Palestinians, a complex transaction which was being examined by the (Israeli) cabinet, but at the last moment the Palestinians broke their promises and submitted applications” to join international treaties, he charged.

“We are ready to discuss and negotiate but we will not accept unilateral steps,” Lieberman said.

A senior Palestinian official, Nabil Shaath, said the Palestinians still had “several options” and would not be deterred.

“Israel’s sanctions will not deter Palestinian steps to join international treaties and organisations,” he said, quoted by the Palestinian news agency WAFA.

The Israeli reprisals have sparked concern in Washington.

“We’ve seen these press reports, but we have not seen an official public announcement by the government of Israel,” State Department spokeswoman Jen Psaki told reporters on Friday.

“That said, we would regard such a development as unfortunate.

“We believe that the regular transfer of the Palestinian Authority’s tax revenues and economic cooperation between Israel and the Palestinian Authority has been beneficial and is important to the well-being of the Palestinian economy.”

The talks hit an impasse two weeks ago when Israel refused to release as agreed a group of Palestinian prisoners and the Palestinians retaliated by seeking accession to several international treaties.