Israeli Prime Minister Benjamin Netanyahu hailed on Monday a US decision to drop efforts to achieve a building freeze in Jewish settlements.

"I welcome this American decision. It is good for Israel. It is good for peace," Netanyahu, who resisted US, Palestinian and international calls for a construction moratorium, told an economic forum hours before the arrival of a US peace envoy.

Faced with the collapse of direct Israeli-Palestinian peace talks over the settlement impasse, US Secretary of State Hillary Clinton announced on Friday that Washington would return to indirect negotiations.

She said the United States would push to resolve core issues of the six-decade-old conflict. They include borders, security and the future of Jerusalem, settlements in territory Israel occupied in a 1967 war and Palestinian refugees.

US Middle East envoy George Mitchell was due back in the region later in the day for talks with Netanyahu and Palestinian President Mahmoud Abbas.

Palestinian officials have voiced concern that Israel would try to undermine any indirect negotiations by avoiding discussion of future borders of a state they intend to establish in the West Bank and Gaza Strip.

"To reach peace, we have to discuss the issues that are truly delaying peace ... I welcome the fact that we will now begin discussing these issues and try to narrow gaps," Netanyahu said.

In the speech he cited issues such as his demand that Palestinians recognise Israel as a Jewish state, security arrangements and the future of Palestinian refugees.

Israel and the Palestinians began direct, US brokered peace talks in Washington in September but they broke down several weeks later when Netanyahu refused to extend a 10-month freeze of housing starts in settlements in the occupied West Bank.

(Source: Reuters)