Israel settlement activity illegitimate - Clinton

By Andrew Quinn and Yasmine Saleh

CAIRO (Reuters) - The United States does not accept Israeli settlements on occupied Palestinian land but believes resuming peace talks is the best way to curb them, U.S. Secretary of State Hillary Clinton said on Wednesday.

Clinton, facing Arab criticism over a perceived U.S. tilt to accommodate Israeli expansion of West Bank settlements, said Washington's stance on the tinderbox issue had not changed.

The remarks were received positively by regional ally Egypt, which wants a focus on the "end-game" of a Palestinian state. But the Palestinians voiced dismay at the lack of progress and said their idea of independence alongside Israel may be doomed.

"We do not accept the legitimacy of settlement activity and we have a very firm belief that ending all settlement activity, current and future, would be preferable," Clinton said after meeting Egyptian President Hosni Mubarak in Cairo.

"Getting into final-status negotiations will allow us to bring an end to settlement activity," she said.

Cairo was Clinton's last stop on a tour in which she faced Arab frustration over signs that U.S. President Barack Obama, stymied by the Middle East deadlock, no longer backs Palestinian demands that Israel immediately stop settlement construction.

"The Egyptian vision is that we have to focus on the end-game, and we should not waste time to get stuck on this issue or that issue in order to start negotiations. We focus on the end-game," Egyptian Foreign Minister Ahmed Aboul Gheit said.

Arab discontent had flared after Clinton endorsed Israel's view that settlement expansion should not be a bar to resuming peace talks, in contradiction to the Palestinian position.