JERUSALEM, April 23 (Allyn Fisher-Ilan - Reuters) - US peace envoy George Mitchell began talks on Friday with Israel and the Palestinians in a bid to revive stalled peace negotiations amid tension in US-Israeli relations.
Mitchell first met Israeli Defence Minister Ehud Barak of the centre-left Labour party, who on Monday expressed concern over the strain in ties and said we must act to change things.

He was then due to meet Prime Minister Benjamin Netanyahu and later Palestinian President Mahmoud Abbas.
A senior Israeli official played down a newspaper report that Netanyahu had proposed agreeing to Palestinian statehood with temporary borders in order to sidestep the current deadlock over Jewish settlements in the West Bank and east Jerusalem. Abbas has rejected past Israeli suggestions for a state with provisional borders, but the left-wing daily Haaretz said Netanyahu was floating an interim deal to entice him back to the negotiating table, as US President Barack Obama is urging.

In Washington, State Department spokesman P.J. Crowley on Thursday said the decision to dispatch Mitchell on a new mission was made after talks with Israelis and Palestinians.
We don't go to meet just to meet. We go there because we have some indication that both sides are willing to engage seriously on the issues, he said.

DIFFERENCES
Netanyahu and Obama have been sharply at odds over Israeli settlement policy in the occupied West Bank, a territory the Palestinians want for their state.

The Israeli leader wants to avoid harming ties with Israel's largest ally, but yielding any ground to the U.S. or Palestinians could unhinge his pro-settler ruling coalition.

He reiterated on Thursday that he would not freeze settlement building in the area of East Jerusalem, land Israel captured in 1967 and annexed as part of its capital in a move not recognised internationally.
Our policy in Jerusalem will not change, he told Israel's Channel Two television. There won't be a freeze in Jerusalem ... Why do I need to give up on Jerusalem?

Netanyahu still has not responded publicly to what political sources have said is a list of 11 confidence-building steps that Obama demanded in talks last month in Washington, to coax Palestinians back to negotiations suspended since December 2008.
Abbas has insisted Israeli settlement building must cease before talks with Israel can resume.

Haaretz said Netanyahu was seeking a deal with Washington to delay further discussion on settlements by establishing a Palestinian state with provisional borders, in exchange for which Israel would avoid unspecified provocations.

For its part, Washington would agree to toughen its policies toward Syria and Iran, whose nuclear programme Israel sees as a threat to its existence, the newspaper said.
Syria and Iran support the Hamas Islamist militants in control of the Gaza Strip, who reject any talks with Israel.