* U.S., Israeli and Palestinian leaders to meet on Tuesday * Each side accuses the other of blocking negotiations * White House says no "grand expectations" of results (Adds White House spokesman, paragraphs 1,4) By Alastair Macdonald JERUSALEM, Sept 21 (Reuters) - Israel and the Palestinians traded blame on Monday for blocking U.S. efforts to revive peace negotiations and President Barack Obama's aides played down what he hopes to achieve when he hosts their leaders in New York. Israeli Prime Minister Benjamin Netanyahu, who on Tuesday will meet Palestinian President Mahmoud Abbas for the first time since taking office in March, made clear through a spokesman he would defend Jewish settlement in the West Bank in the face of demands from Abbas -- and from Obama -- for a halt to building. Echoing Palestinian officials who say the meeting during the U.N. General Assembly does not mean a return to a negotiating process that was suspended in December, Netanyahu ally Benny Begin said: "The summit will not mark a start to negotiations." Obama's spokesman also played down the scope of the talks: "We're looking to continue to build on progress," Robert Gibbs said. "We have no grand expectations out of one meeting." Begin, a cabinet minister, voiced frustration with pressure from the new White House administration on its key Middle East ally to meet a 2003 commitment to stop expanding settlements: "The United States and European nations have let the Palestinians think they will be served whatever they want along with a side order of Israel's head on a cheap McDonald's platter," he told Army Radio. "But this is not going to happen." Chief Palestinian negotiator Saeb Erekat said: "For the last eight months, the clear message from the international community has been that both sides need to meet their obligations." Israel cannot "haggle its way out of" commitments, Erekat added in a statement. A settlement freeze was an Israeli obligation, he said, not a Palestinian precondition. "PALESTINIAN INTRANSIGENCE" Israeli Deputy Foreign Minister Danny Ayalon, however, said Netanyahu viewed a settlement freeze as a "bizarre" precondition and accused Abbas of shirking his own commitments under the 2003 U.S.-backed "road map" to peace. Among these were a failure to disband Palestinian militant groups, Ayalon told Reuters. "It's only Palestinian intransigence which prevents us from moving forward," he said. "If they come down to earth and get back to their senses, I think we can really move forward." Netanyahu has said he was ready to negotiate but not to pick up where talks, sponsored by Obama's predecessor George W. Bush, left off last year under the previous government of Ehud Olmert. Ayalon said that process, which Palestinians want to resume to resolve core issues in the conflict, was already killed off by Abbas. He added that the hold of Abbas's Islamist rivals Hamas on the Gaza Strip was also hindering a final negotiation. Without a change in Palestinian positions on refugees and the status of Jerusalem, Israel would rather have an "interim process" to bolster security and prosperity, Ayalon said. OBAMA ON THE SPOT Erekat said he still hoped Obama could "bring Israel back to the negotiating table". What was needed, he said, was a freeze on settlements and negotiations on core issues at the heart of a six-decade-old conflict which Obama says he wants to resolve. Netanyahu faces considerable opposition from supporters of his own coalition to making concessions on settlements, where half a million Jews live among some 3 million Arabs in the West Bank and East Jerusalem, territories captured in 1967. The World Court calls the settlements illegal and Palestinians say the enclaves could deny them a viable state. Israeli officials have said Netanyahu last week offered Obama's envoy George Mitchell a 9-month freeze in building in the West Bank, but Washington wanted a one-year freeze in order to help persuade Abbas to resume peace negotiations. Abbas wants an open-ended halt to settlement that includes East Jerusalem, pending a final peace in which Israel might annex existing settlements as part of a land swap. Officials on both sides say the summit may be little more than a PR opportunity for Obama, who has otherwise little to show for his peacemaking efforts after promising Arab allies he would work to end a permanent source of tension in the region. Leading Israeli commentator Nahum Barnea, writing in the Yedioth Ahronoth newspaper, called the meeting "a joke at the expense of the American president, who has chosen to get involved in Middle East politics and is suffering for it". (Additional reporting by Ori Lewis in Jerusalem and Matt Spetalnick in Albany, New York; Editing by Douglas Hamilton and Jon Boyle) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)
Prefabricated houses are seen in the West Bank Jewish settlement of Kokhav Hashahar, east of Ramallah, September 21, 2009. Israel and the Palestinians accused each other on Monday of thwarting U.S. ...
