The Middle East peace process has hit a new obstacle after the United States admitted defeat in its efforts to secure an Israeli freeze on settlement building.

US officials admitted yesterday that top-level efforts to coax Israel into imposing new curbs on West Bank settlement construction had gone nowhere.

Palestinian President Mahmoud Abbas has now declared a crisis in peace efforts, as the Palestinians have refused to negotiate without a new freeze.

The comments effectively deadlock direct peace talks, which opened on 2 September only to run aground just weeks later when building resumed in the settlements.

'We have been pursuing a moratorium as a means to create conditions for a return to meaningful and sustained negotiations,' US State Department spokesman Philip Crowley.

'After a considerable effort, we have concluded that this does not create a firm basis to work towards our shared goal of a framework agreement.'

Responding to the development, Mr Abbas said: 'There is no doubt that there is a crisis.'

Top Abbas aide Yasser Abed Rabbo blamed the failure of US efforts on Israeli stubbornness.

'The policy and the efforts of the US administration failed because of the blow it received from the Israeli government,' he said.

A spokesman for Israeli Prime Minister Benjamin Netanyahu said Washington's announcement marked a welcome acknowledgement by President Barack Obama's administration that freezing construction was not the way to achieve peace.

'We said from the outset that settlements were not the root of the conflict and that it was only a Palestinian excuse for refusing to talk,' Nir Hefetz said.

Israeli and Palestinian officials are expected to visit Washington next week for separate talks with the Americans on ways to keep the peace process alive, Mr Crowley said.

The US has been trying for weeks to convince Mr Netanyahu to impose a new moratorium on settlement construction in the occupied West Bank.

A 10-month freeze expired on 26 September, shortly after the launch of the first direct peace talks in nearly two years.

Tony Blair, envoy for the Middle East diplomatic Quartet of the EU, Russia, the UN and the US, told journalists in Jerusalem the decision did not mean the collapse of peace efforts.

'Despite this decision, there is no doubt at all in my mind that there remains a fixed determination on behalf of the United States, the Quartet ... the Israeli government and the Palestinian leadership to make sure that we find a way to get credible and serious negotiation back on track again,' he said.

The EU said it regretted Israel's rejection of a new freeze.

'We note with regret that the Israelis have not been in a position to accept an extension of the moratorium as requested by the EU, the US and the Quartet,' spokeswoman Maja Kocijancic said.

The Israeli right expressed delight at the government's refusal to give in to pressure from its main ally.

Deputy parliament speaker Danny Danon praised Mr Netanyahu for rebuffing US calls for another 'damaging and pointless' freeze.

Militant Palestinian group Hamas, which controls Gaza, said US failure to secure any concession from Israel vindicated its longstanding opposition to the policy pursued by its rivals in Abbas' Fatah party.

'Fatah has lost its gamble of counting on Washington as the US position on the Palestinian question is always utterly dependent on Israel,' Hamas spokesman Fawzi Barhum said.