Palestinian Authority President Mahmoud Abbas has rejected Israel's latest vision of a Mideast peace agreement, saying he will unilaterally seek recognition of an independent state at the United Nations if there is no progress in negotiations by September.

Abbas, speaking Wednesday in Ramallah, said Israeli Prime Minister Benjamin Netanyahu's speech a day earlier to the U.S. Congress "contained nothing we can build on."

"Our first choice is negotiations, but if there is no progress before September we will go to the United Nations," Abbas was quoted as saying to a meeting of the Palestinian Liberation Organization.

The Palestinians walked away from negotiations with the Israelis in protest over continued construction on land they view as belonging in a future Palestinian state.

On Tuesday, Netanyahu insisted he is willing to make "painful compromises" to reach a peace agreement with the Palestinians, but adds his country will never accept borders with a future Palestinian state along "indefensible" pre-1967 lines.

In London, U.S. President Barack Obama restated his opposition to efforts by the Palestinians to pursue statehood through the UN, calling it a mistake. Obama has previously suggested the United States will use its veto power on the UN Security Council to block any such move. 

He said Wednesday that achieving a peaceful Middle East will require "wrenching compromise" by the Israelis and Palestinians, but an accord will never be reached unless both sides come back to the table.

Netanyahu told legislators in Washington on Tuesday that Israel will be generous on the size of a future Palestinian state "but will be firm about where we put the borders with it."

Netanyahu acknowledged that parts of the "ancestral Jewish homeland" in the West Bank must be given up in any agreement.

But he also said the deal must acknowledge the "dramatic demographic change" in the region — an apparent reference to the 300,000 Jewish settlers now living in enclaves in the territory, in addition to 180,000 Israelis living in neighbourhoods built in East Jerusalem.

Netanyahu called on Abbas to "tear up" his recent reconciliation agreement with Hamas, saying the militant faction cannot be a partner for peace while refusing to drop its calls for Israel's destruction.

The Israeli leader also said that he would never accept the division of Jerusalem and that "other places of critical strategic and national importance" would be part of Israel in any future peace deal.

Dispute over 'indefensible' lines

Obama again appealed to both sides on Wednesday to focus on settling borders under a two-state solution before tacking more heated issues in negotiations, such as the status of Jerusalem and the right of return for Palestinians displaced by Israel's creation and victory over Arab forces in 1948.

"The last two questions are extraordinarily emotional," Obama told reporters at a news conference alongside British Prime Minister David Cameron.

"They go deep into how both the Palestinians and the Jewish people think about their own identities. … I believe that those two issues can be resolved if there is the prospect and the promise that we can actually get to a Palestinian state and a secure Jewish state of Israel."

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U.S. President Barack Obama and Israeli Prime Minister Benjamin Netanyahu have sparred over Obama's recent remarks that an Israeli-Palestinian peace deal should include two states based on pre-1967 demarcation lines along with land swaps. ((Charles Dharapak/Associated Press))

Last week, Obama declared the United States supports creation of a Palestinian state based on the demarcation lines that existed before the 1967 Six Day War — in which Israeli forces occupied east Jerusalem, the West Bank and Gaza — but also with "land swaps" agreed upon by the two parties.

That prompted a furious denunciation from Netanyahu, who vowed Israel would never accept a two-state solution with the "indefensible" pre-1967 lines.

Abbas, however, praised Obama's parameters for a Mideast peace deal on Wednesday, saying they laid a positive foundation for negotiations.

With files from The Associated Press