SIRTE, Libya, Oct 8 (Reuters) - The Arab League does not believe that peace talks between Israel and the Palestinians are bearing fruit, but stopped short of asking the Palestinians to walk away, Arab League Secretary-General Amr Moussa said on Friday.

He said Arab foreign ministers meeting in the Libyan town of Sirte would begin drafting alternatives for the peace process because the current round of talks has stalled.

We will meet to formulate the beginning of alternatives within the framework that the negotiations are not bearing fruit, Moussa said after a meeting of the Arab League's peace process follow-up committee in Libya.

There are no talks at the moment because the position of the Israelis is very, very negative. They are not cooperating in the negotiations, Moussa said.

The committee would meet the Palestinian delegation on Friday night but would not advise Palestinian President Mahmoud Abbas what he should do next, Moussa said.

The Arab League foreign ministers met in Sirte to hear Abbas's case for suspending talks with Israel until it extends a moratorium on Jewish settlement-building in the occupied West Bank.

Launched in Washington just five weeks ago, the talks veered into a dead end on Sept. 26 when Israeli Prime Minister Benjamin Netanyahu refused to extend a halt to construction of Jewish settlements, which he had said would last 10 months.

Abbas spokesman Nabil Abu Rdainah said earlier the Palestinian leader would tell the Arab states that resuming negotiations requires a full freeze of settlement activities. Abbas has said he wants to go on negotiating but cannot unless the building of new homes for Jewish settlers is frozen for three to four months more to give peace a chance.

Palestinians regard settlement expansion as a threat to chances of a viable state on land Israel captured in a 1967 war.

Netanyahu says it would be tragic if Abbas walked away over an issue which he says is irrelevant to the possible outcome of talks -- a peace deal to end 60 years of conflict and create a Palestinian state.

The United States wants the talks to continue and has been trying to find a formula to save the negotiations.

Senior Palestinian official Yasser Abed Rabbo said on Thursday he saw no hope of a serious peace process with Netanyahu, in some of the darkest comments to date on the U.S.-mediated talks.

Netanyahu, who heads a cabinet dominated by pro-settler parties, including his own Likud, has said he will not extend the freeze that his government had enforced for 10 months.

Abbas and Netanyahu met three times before the end of the moratorium. The Palestine Liberation Organisation (PLO) said on Saturday talks would not resume until Israel stopped settlement building on land where the Palestinians aim to found a state.

The United States and European Union had called on Israel to extend the settlement freeze. The expiry of the moratorium had been seen as an early obstacle facing U.S. President Barack Obama's push to end the six-decade-old conflict within a year.