President Mahmoud Abbas on Wednesday said peace talks with Israel were in crisis after Washington's decision to drop its demand for a new freeze on settlement building in the occupied West Bank.

"There is no doubt that there is a crisis," Abbas said after his meeting with Prime Minister George Papandreou in Athens.

Abbas said he hoped the European Union would get involved in relaunching the negotiations. "We hope that the time will soon come when the EU will play a role alongside the United States."

The US admitted Tuesday that it had dropped its demand that Israel renew a freeze on settlements as a condition for resuscitating the direct peace negotiations, a decision welcomed by the Israeli government.