JERUSALEM, Aug 12 (Reuters/Douglas Hamilton) - Major powers are working on a statement to set the basis for direct peace talks between Israel and the Palestinians, a Western diplomat said on Thursday.

The Palestinians say this would persuade them to resume face-to-face talks, but Israeli newspapers said Prime Minister Benjamin Netanyahu told US envoy George Mitchell on Wednesday he wants talks to start immediately without any such precondition.

Netanyahu spokesman Mark Regev had no direct comment on the reports, which concluded that Mitchell's mission to get both sides talking directly had failed.

The government of Israel has been calling for the immediate start of direct peace talks between Israelis and Palestinians for more than a year now, Regev told Reuters.

Palestinian President Mahmoud Abbas refuses to engage in direct talks unless Netanyahu agrees to a clear agenda. Without one, say the Palestinians, Netanyahu may propose terms for a peace treaty that are completely unacceptable, and leave Abbas looking like a rejectionist when he turns them down.

Indirect talks mediated by Mitchell have made no visible progress. Analysts say Abbas's credibility could be destroyed if Netanyahu engaged him in endless direct talks while making no concrete moves on the ground to end the Israeli occupation.

This week, ahead of Mitchell's latest shuttle, Abbas indicated he could go for face-to-face negotiations, if talks were based on a March 19 statement by the Quartet of powers involved in Middle East diplomacy -- the United States, European Union, Russia and United Nations.

AGENDA

The Quartet says Israel should halt settlement building in the occupied West Bank and reach a full peace agreement with the Palestinians within 24 months, creating a state on the basis of the borders that existed before the 1967 Middle East war.

A Western diplomat said the Israeli press reports that Netanyahu had rejected this idea have not changed anything.

This remains the objective. This is what's in the air, he said. Quartet diplomats were working on the language of a statement inviting the parties to go back to direct negotiations on the lines of the Quartet's position.

In a matter of days we shall see if agreement is found on that language and if it is good enough to produce direct talks.

A Palestinian source close to negotiations said an agenda for the talks which speaks of a Palestinian state on the basis of pre-1967 borders is not in any way an attempt to fix borders before negotiation.

This language is what has been accepted in all the agreements over the past 18 years by Israeli prime ministers, including Netanyahu in his first term, he said.

Both sides know land would be swapped in an eventual deal and borders adjusted accordingly.

Mitchell returned to Washington without divulging the outcome of his fifth shuttle since proximity talks began in May, after a hiatus of nearly 18 months in the peace process. US President Barack Obama wants the peace process to return to the level it broke off at nearly two years ago, when Israel went to war in the winter of 2008-09 to stop rockets being fired from the Gaza Strip by Hamas militants.

The window of opportunity is narrowing. A partial 10-month moratorium on Israeli settlement building in the occupied West Bank, ordered by Netanyahu last November, is due to end on Sept. 26, posing a potentially fatal threat to any dialogue.