RAMALLAH, Sept 29 (Ali Sawafta/Reuters) - The Palestine Liberation Organization effectively rejected on Thursday a proposal by the European Union, the United States and Russia to resume suspended peace negotiations with Israel next month without precondition.

The PLO executive committee, meeting in Ramallah, noted the proposal but said, as expected, that Israel must halt all settlement building in the occupied West Bank before they will restart talks, as Palestinian President Mahmoud Abbas has insisted. Israel has made clear it is not ready to do that.

The Palestinian leadership stresses clearly that it cannot accept holding negotiations that lack the minimum limits of responsibility and seriousness amid the continuation of settlements and stealing of land, said top PLO official Yasser Abed Rabbo.

Abbas leads both the Palestinian Authority, set up to administer Palestinian territories under interim peace agreements, and the PLO, the body which negotiates with Israel.

On Friday, Abbas formally asked the United Nations to recognize a Palestinian state in the West Bank and Gaza Strip, a move opposed by Israel and the United States who say only a negotiated peace can end the 63-year-old Middle East conflict and create a Palestinian state alongside Israel.

The proposal for breaking the deadlock had little chance. Abbas's diplomatic initiative has set the Palestinians on a new course to circumvent a peace process that he says has achieved nothing over the past 18 years, and Abbas is unlikely to abandon it unless Israel agreed to his terms for talks.

Israeli Prime Minister Benjamin Netanyahu is urging Abbas to return to negotiations without preconditions. He insists that the Palestinians recognize Israel as a Jewish state, which they refuse to do.


QUARTET EFFORTS

The European Union, Russia, the United Nations and the United States -- known as the Quartet -- tried for months but failed to draft terms of reference that might find a compromise and breathe life into peace talks that collapsed nearly a year ago.

Instead, to try to defuse a clash over the Palestinians' U.N. initiative, and a U.S. veto of it, they issued a statement calling for preparatory talks in a month, substantive proposals from both sides on borders and security within three months, and a peace deal by the end of 2012.

Abed Rabbo did not expressly reject the Quartet proposal. He told reporters the PLO had noted it and said it included some encouraging items, such as its reference to the 1967 borders -- the lines that existed before occupation of the lands, which the Palestinians want to be the basis of their state.

Some 500,000 Jewish settlers have taken up residence in the West Bank and East Jerusalem in the past four decades. Israel drew criticism this week when it announced plans for another 1,100 apartments in a Jerusalem suburb in the West Bank.

Israel says Gilo is not a settlement but a part of the city, the whole of which it claims as its capital. Its annexation of the land is not recognized internationally.

Tayseer Khaled, a member of the PLO Executive Committee, told Reuters: The Quartet committee statement is not acceptable. It is not clear and it holds the stick in the middle and divides responsibility between the two sides.

The Quartet committee should either be a credible and responsible international institution (or) say 'we cannot compel Israel to respect international law'.

The U.N. Security Council on Wednesday took its first step on the Palestinian application, handing it to a committee that will review and assess it in the coming weeks.

The standing committee on the admission of new members to the world body is comprised of all 15 Council members. Western diplomats say the bid is doomed to fail due to U.S.opposition.

The PLO executive urged the Security Council to accept statehood. (Additional reporting by Nidal al-Mughrabi in Gaza and Douglas Hamilton; Editing by Alastair Macdonald)