US and European diplomats were scrambling to find a compromise solution yesterday that would recognise Palestinian aspirations, placateIsrael and somehow persuade both sides to set aside their antagonism and resume negotiations.
In a sign that hopes of reviving peace talks and avoiding a vote on statehood at the United Nations were not dead, Benjamin Netanyahu, the Israeli prime minister, called for a meeting in New York with Mahmoud Abbas, the Palestinian president, to relaunch “direct negotiations”.
"The prime minister is interested in a meeting with the president of the Palestinian Authority in New York," Mr Netanyahu's office said in a brief statement.
Hillary Clinton, the US Secretary of State, said there was still time to find a solution to the diplomatic crisis.
Mahmoud Abbas, the Palestinian leader, arrived in New York on Monday night to prepare for his historic address before the UN General Assembly on Friday, when he will make his case for international recognition of a sovereign state of Palestine.
Mr Abbas admitted that he had come under "tremendous pressure" to drop his bid and return to talks with Israel, but he insisted that nothing would deflect him from his course.
"We have decided to take this step and all hell has broken out against us," he said.
In a sign of growing unease among traditional supporters of the Palestinian cause in Europe, France called on Mr Abbas to make an explicit commitment to peace talks.
Alain Juppe, the French foreign minister, gave warning that the present Palestinian position was "neither acceptable nor tenable" and that compromise was essential.
William Hague, the Foreign Secretary, said Britain was attempting to "exert as much pressure on both sides to return to negotiation" but declined to say how it would vote on the issue this week.
Despite his frequently tetchy relationship with Benjamin Netanyahu, the Israeli prime minister, President Barack Obama has promised to wield the US veto to block the Palestinian bid when it comes to the Security Council.
There is also mounting concern in Washington over how Mr Netanyahu proposes to respond to the Palestinian bid, which is seen in Israel as a "unilateral" step designed to bypass peace talks.
The Israeli government has warned of unspecified consequences if the Palestinians submit their application. Some members of Mr Netanyahu's right-wing coalition have called on Israel to annex Jewish settlements in the West Bank and halt the disbursement of customs revenues it collects on behalf of the Palestinian Authority.
But on Monday it emerged that Mr Obama had sent envoys to Jerusalem to countenance against such a course, arguing that it could cause the collapse of the PA, a development that would ultimately harm Israel's security.
Under the moderate leadership of Mr Abbas, the PA has forged a close security relationship with Israel. Palestinian forces have mounted a successful campaign to root out militant groups in the West Bank, bringing terror attacks on undisputed Israeli territory to an almost complete halt.
But many in the Palestinian forces are themselves former militants who fought against Israel during the Second Intifada in the first half of the last decade – and some say they are seething at the prospect of Israel and the United States blocking Palestinian statehood.
"There will be a massive military intifada if the Israelis do not accept a Palestinian state," one former militant now in the Palestinian security forces in the West Bank city of Jenin said. "If the people start an intifada, I will join the people."
So far, the loyalty of many former militants in the security forces has been bought by regular salaries. Moderate voices in the Israeli security and political establishment warn that if Palestinian customs revenues, worth £69 million a month, are withheld, the PA will not be able to afford to pay those salaries.
Many Palestinian servicemen have already been on half-pay for two months because of a funding crisis after Arab donor states failed to distribute promised funds to Mr Abbas.
Despite the American advice to Israel, Congress is threatening to suspend £300 million in aid if the Palestinian bid goes ahead, a sanction that could also trigger the collapse of the PA.
Without the PA, Israeli troops would also be forced to return to Palestinian cities in the West Bank, triggering almost inevitable confrontations with protesters on the streets.
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