By Christophe Schmidt and Ines bel Aiba - CAIRO
Middle East peace talks must include the disputed city of Jerusalem, US Secretary of State Hillary Clinton said on Wednesday after meeting Egyptian President Hosni Mubarak.
"There is no doubt that moving toward a state that reflects the aspirations and the rights of the Palestinian people must include all of the issues that have been discussed and mentioned by President (Barack) Obama, and that includes Jerusalem," she said.
"We want to assure you that our goal is a real state, with a real sovereignty," she added at a joint press conference with Egyptian Foreign Minister Ahmed Abul Gheit.
Clinton extended a regional trip at the last minute to meet Mubarak after creating a storm by praising an Israeli plan to restrict settlement construction.
The Secretary of State said on Wednesday that the settlements are illegitimate but again described the plan "as unprecedented."
"Our policy on settlement activity has not changed. We do not accept the legitimacy," she said, adding that the Israeli offer, which would allow a limited expansion of the settlements, was "not what we prefer."
But "what we have received from the Israelis... is unprecedented," she said. "It's a positive movement... just like the Palestinians made progress on security," she said.
The settlements in the occupied West Bank and east Jerusalem, which Israel seized in the 1967 war with its Arab neighbours, are home to nearly 500,000 Israelis and are considered illegal by the international community.
Arab officials accused the Obama administration of reneging on its call earlier this year for a complete end to settlement building and said Clinton's clarifications did not go far enough.
Egyptian Foreign Minister Ahmed Abul Gheit, who had said Cairo wanted Clinton to clarify her remarks on the settlements in her visit, described his and Mubarak's meetings with her as "very useful."
He blamed Israel for stalling the talks but appeared to suggest a softening of Egypt's stance in supporting the Palestinian refusal to resume talks in the absence of a settlement freeze.
"Israel is putting conditions to start negotiations by continuing to hold on to settlement activity," he told reporters.
"We should focus on the end of the road and not lose the issue by holding on to this or that as a precondition for negotiations," he said.
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