AMMAN, March 22 (Suleiman al-Khalidi - Reuters) - US envoy George Mitchell on Monday urged Israel and the Palestinians to observe a period of calm and quiet to rescue talks thrown into jeopardy by a dispute over new settlement plans in East Jerusalem.

Israel's announcement during a visit by US Vice President Joe Biden two weeks ago that it would build 1,600 homes for Jews in occupied land near East Jerusalem embarrassed Washington and threatened planned indirect talks with the Palestinians.

On behalf of the United States and the president, I urge all sides to exercise restraint. What is needed now is a period of calm and quiet, in which we can go forward in the efforts we are engaged, Mitchell told reporters after meeting Palestinian President Mahmoud Abbas in Amman.

The settlement issue, accompanied by growing violence in the occupied West Bank where Israeli forces have killed four Palestinians in two days, is threatening renewed efforts by Mitchell to get peace talks under way.
Mitchell said Abbas expressed concern about the latest violence but was still optimistic that indirect discussions, known as proximity talks, would begin soon between the two sides after a 15-month hiatus in direct negotiations.

We discussed a full range of issues, including our common desire to enter the proximity talks at the earliest possible time in a manner which we hope would lead to direct negotiations, he added.
Israeli Prime Minister Benjamin Netanyahu flew to Washington at the weekend after meeting Mitchell. He will address the pro-Israel lobby group AIPAC on Monday, and an aide said he would meet President Barack Obama on Tuesday.

The Palestinians were sticking publicly to their refusal to restart talks until Israel freezes settlement building.
Palestinian chief negotiator Saeb Erekat told reporters Abbas conveyed to Mitchell the view that Israel's East Jerusalem settlement plans were undermining U.S. efforts to revive the peace process.

Although we need to give proximity talks the chance they deserve, we must make sure that decisions by Israel to construct 1,600 housing units in East Jerusalem and more to come must really stop and come to an end, Erekat said.