"It is neither logical nor in Israel's interest to negotiate with a stopwatch in hand," Environment Minister Gilad Erdan told Israeli public radio.

Erdan, who is considered close to Israeli Prime Minister Benjamin Netanyahu, said the premier "will continue to work for peace with the understanding that its price will not be one that threatens Israel's existence and future."

His comments came after US Secretary of State Hillary Clinton on Friday called on Israel and the Palestinians to redouble their efforts to tackle the final status issues at the centre of their decades-old conflict.

"It is time to grapple with the core issues of this conflict: on borders and security, settlements, water and refugees, and on Jerusalem itself," Clinton told an audience in Washington, days after the US administration admitted it had failed to relaunch stalled peace talks by securing a new Israeli settlement freeze.

But Erdan said large-scale Israeli withdrawals from the West Bank and east Jerusalem would turn those areas into bases for Islamists allied with Iran.

And he rejected comments by Israeli Defence Minister Ehud Barak who, speaking after Clinton on Friday, said a negotiated peace deal would include the division of Jerusalem.

On that issue, Barak "represents neither the government, nor the prime minister," Erdan said.

The United States conceded last week that it had failed to convince Israel to renew a freeze on settlement construction, a Palestinian precondition for the resumption of talks that stalled shortly after they began in September over the issue of Jewish construction in the West Bank.

The apparent collapse of direct peace talks has led some in Netanyahu's fragile coalition to threaten to withdraw.

Commerce and Industry Minister Benjamin Ben Eliezer, a member of the Labour party, warned Sunday that there was no reason for his party to remain in government if "peace talks were frozen."

"We will not take our place in a government if there are no peace talks," he told public radio, adding that Israel has "very little time" to present its own proposals for peace talks, as called for by Clinton on Friday.

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