They reacted Saturday to a Clinton speech in which she said Israelis and Palestinians both bear responsibility.

The Obama administration said earlier this week that it stopped trying to get Israel to curb construction in West Bank settlements for three months, after a 10-month slowdown ended in September.

The Palestinians won't resume negotiations without a full construction freeze. The US now wants to return to indirect talks.

Despite their disappointment with Washington's performance, the Palestinians are likely to participate. They say they'll make a final decision within a week.

Without suggesting a new path toward peace, Clinton expressed frustration with the impasse while insisting the Obama administration will “not lose hope.”

She said the US will keep pressing for a solution, and she called on Israelis and Palestinians to set aside their differences. “It is no secret that the parties have a long way to go and that they have not yet made the difficult decisions that peace requires,” she said earlier in a dinner speech Friday at the Saban Forum, a Mideast policy seminar sponsored by the Brookings Institution think tank. “And like many of you, I regret that we have not gotten farther, faster.”

Clinton made clear that she believes the Israelis and Palestinians are ultimately responsible for settling their long conflict.

“Unfortunately, as we have learned, the parties in this conflict have often not been ready to take the necessary steps,” she said.

“Going forward, they must take responsibility and make the difficult decisions that peace requires. This begins with a sincere effort to see the world through the other side’s eyes, to try to understand their perspective and positions.

“Palestinians must appreciate Israel’s legitimate security concerns. And Israelis must accept the legitimate territorial aspirations of the Palestinian people. Ignoring the other side’s needs is in the end self-defeating.”

And she said the status quo is untenable. “I know that improvements in security and growing prosperity have convinced some that this conflict can be waited out or largely ignored,” she said. “This view is wrong and it is dangerous.”

US envoy George Mitchell is to leave Sunday evening for the Middle East for talks with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas.

Meanwhile, Israeli Defense Minister Ehud Barak raised anew the prospect of sharing Jerusalem with the Palestinians as part of a peace deal, in sharp contrast with views held by Netanyahu.

“Jerusalem will be discussed at the end with ... western Jerusalem and the Jewish (areas) for us, the refugee-populated Arab neighborhoods for them and an agreed upon solution in the holy places,” Barak said.

In a separate development, Australian Foreign Minister Kevin Rudd warned in talks with Egypt's President Hosni Mubarak on Saturday that time is running out on the peace process.

Canberra is concerned because “no real progress” has been made in the US-brokered peace process and time is “running out,” Rudd told reporters after the meeting in Cairo.

The construction of new Jewish settlements in the occupied West Bank undermines the push for a peace settlement, which should pave the way for an independent Palestinian state and guarantee Israeli's security, he said.

Rudd later met Egyptian Foreign Minister Ahmed Abul Gheit and said at a joint news conference that Israeli settlements contribute to “destroying” the chances of peace.

The Australian foreign minister said he expected to visit Israel soon and would reiterate this position, adding however that the Jewish state had security fears and that these should be taken into account.

Abul Gheit said all eyes were now on what steps the United States will take to help kick-start peace talks.