US still confident of Middle East peace deal

Dr Rice was speaking at a joint press conference with the Palestinian President, Mahmoud Abbas, in Ramallah.

She says the Bush administration is committed to the creation of a Palestinian state but has described continued Israeli settlement activity in the West Bank as problematic.

"The United States continues to hold the view that settlement activity is contrary to roadmap obligations and continues to raise with the Israelis the importance of creating an atmosphere that is conducive to negotiation of the final status agreement," she said.

The Israeli foreign minister, Tzipi Livni, says the issue won't stand in the way of a peace deal, insisting that no new settlements are being built in the occupied territories.