OCCUPIED JERUSALEM: Senior Palestinian negotiator Saeb Erakat warned Wednesday that failure to reach a peace deal with Israel this year could lead to a collapse of the Palestinian Authority. "If we fail to produce an agreement in 2008 ... we may disappear," Erakat said. "The impact will not be limited to Israel and the Palestinians," he warned. "Watch the region."

Israel and the Palestinians, led by President Mahmoud Abbas, last November relaunched the Middle East peace talks at an international conference in the United States after a seven-year hiatus. Although both Abbas and Israeli Prime Minister Ehud Olmert have expressed their desire to ink a deal by the end of 2008, talks have so far made little headway.

Abbas said after meeting Slovenian Foreign Minister Dimitrij Rupel in the Occupied West Bank town of Ramallah that peace talks were the only option for the Palestinians. "We don't have any other options but to negotiate. Time is short and we must reach a result before the end of the year," he said.

Erakat declined to say whether the Islamist Hamas movement could rout Abbas in the West Bank, but conceded the popularity of Abbas has declined sharply while support for the Islamists has risen.

"People are angry with us ... Their pessimism and anger is because of our inability to deliver," he said.

The Islamist movement last June violently seized power in Gaza after routing forces loyal to Abbas, effectively splitting the Palestinian Authority in two.

Erakat said Israel's failure to carry out its commitment to freeze its settlement construction and to ease movement restrictions in the Occupied West Bank undermined Abbas' credibility. "At the same time we tell [Palestinians] we will make 2008 the year of peace," he complained, "we fail to stop [Israeli] roadblocks, we fail to stop [Israeli] settlement activity." 

He said Olmert personally pledged to Abbas the roadblocks would be removed, but that nothing was done about it.

And since the November conference in Annapolis, where Israel committed to halt Jewish settlement activity, 5,378 new houses were built, said Erakat.

"Settlement activity must stop," he said. "It's either settlements or peace."

Also Wednesday, Israeli bulldozers demolished five Palestinian homes near the Occupied West Bank town of Hebron.

The Israeli military said the homes were built without proper permits. The Israeli authorities rarely issue permits for Palestinians.