WASHINGTON (AP):

President Barack Obama said on Tuesday he is encouraged by progress in United States (US) efforts to bring Israel and the Palestinians back to the negotiating table, thanking his Egyptian counterpart for help in working for a breakthrough.

The president was responding to a question about reports that Israel had stopped granting permission for new settlements in the West Bank, even though projects in progress were continuing.

Obama has made a resumption of peace talks between Israel and the Palestinians one of his key foreign-policy goals, hoping a breakthrough there would lead to wider agreements among the Jewish state and the Arab world.

To that end, Obama has deman-ded that the Israeli government of Prime Minister Benjamin Netanyahu freeze construction of Jewish settlements in east Jerusalem and the West Bank, land that the Palestinians want for a state. Netanyahu's public refusal has opened a rare rift between the two traditionally close allies.

"The Israeli government has taken discussions with us very seriously," Obama said, adding that he was "encouraged by what I am seeing on the ground".

"All parties," he said, "have to take steps to restart serious negotiations," including Palestinians efforts to end the incitement of violence against Israel.

"We are moving in the right direction," said visiting Egyptian President Hosni Mubarak, "and the Arab states are ready to help if the Israelis and the Palestinians returned to peace talks."

Fantastic address

Mubarak also strongly praised Obama's Cairo speech to the Arab world earlier this summer.

"The importance of the Cairo visit was very appreciated by the Muslim and Islamic world because the Islamic world had thought that the US was against Islam, but his great, fantastic address there has removed all those doubts," Mubarak said.