"I hope that the Israeli government, given the choice between settlement and peace, will choose peace. They can't have both," chief Palestinian negotiator Saeb Erekat told Reuters when asked about Obama's comments.

In his remarks to reporters, Netanyahu voiced disappointment over the Palestinian position on a recognition demand that has been the focal point of his vision of a final peace agreement.

"Unfortunately I am not yet hearing from the Palestinians the sentence 'two states for two peoples'," Netanyahu said.

Palestinians have said they have already recognized the state of Israel in past declarations and in interim peace agreements that set the basis for establishing a state of their own in the West Bank and Gaza Strip.

"This recognition is done," Erekat said.

But explicit recognition of Israel as a Jewish state, Palestinian officials have said, could jeopardize the claims of Palestinian refugees, who fled or were forced to flee Arab-Israeli fighting, to a right of return to homes in what is now Israel. http://news.yahoo.com/s/nm/20100912/ts_nm/us_palestinians_israel

Netanyahu silent on Obama settlement freeze remarks