Israeli Premier Ehud Olmert and Palestinian President Mahmoud Abbas met Thursday afternoon, in the shadow of a row over Israeli settlement building which has prevented progress in two rounds of talks between Israeli and Palestinian negotiators.

An Israeli official said the two men would attempt to find "common ground" in their first face-to-face talks since last month's meeting in Annapolis, Maryland, which revived the peace process after a seven-year lull, much of it violent, and saw both leaders pledge to try reach a peace deal by the end of 2008.

But Palestinian officials said their main item on the agenda would be a demand Israel halt all settlement activity.

"The President will be very clear; the building of settlements must stop first," the spokesman, Nabil Abu Rudeineh, told Voice of Palestine Radio. "The negotiations must be serious."

Palestinians are angered by Israeli plans to build in Har Homa, a Jewish neighbourhood in East Jerusalem. Israel announced at the beginning of December that it intends constructing more than 300 new houses there, and a budget proposal for 2008 also allocated funds for around 240 new apartments in Ma'aleh Adumim, a large settlement east of Jerusalem.

The dispute turned the first two meetings of the Israeli and Palestinian negotiating teams into platforms for mutual recriminations, with the Israelis for their part raising concerns the Palestinians were not fulfilling obligations to crack down on militants.

"Senior Israeli government officials" quoted in the Jerusalem Post daily said the Olmert-Abbas track has been "more fruitful" than the the meetings between the negotiating teams headed by Israeli Foreign Minister Tzipi Livni and former Palestinian prime minister Ahmed Qureia.

"The Olmert-Abbas track has been constructive in the past, and we believe it can be constructive in the future," Israeli government spokesman Mark Regev told Deutsche Presse-Agentur dpa.

"The issues are sensitive and complicated," he said. "To ignore the challenges is to ignore reality."

Olmert and Abbas have been meeting regularly since June, when Abbas pulled his Fatah party out of the Hamas-led unity government, following the Islamist movement's violent takeover of the Gaza Strip.

Hamas, which rejects the two-state solution to the Israeli- Palestinian conflict in favour of an Islamic state in all of historic Palestine, slammed the Olmert-Abbas talks as coming "in the shadow shadow of the ongoing Israeli attacks on the Palestinians and expanding the settlements in Jerusalem."

"These endless meetings between the two sides are worthless and carry no weight in serving our people's national cause. Instead, they harm the people's higher interests," the movement said in a statement.