There can be no peace with Israel without first defining the borders of a future Palestinian state, president Mahmud Abbas said on Tuesday.

"Since the creation of Israel, nobody knows what the borders are. We are determined to know our borders and theirs, without that there will be no peace," he said as Washington's nine-month deadline for reaching a peace deal expired, leaving the process in tatters.

In a televised address, Abbas laid out his conditions for returning to the crisis-hit peace talks with Israel which have made no progress since they were launched on July 29 last year.

"If we want to extend the negotiations there has to be a release of prisoners ... a settlement freeze, and a discussion of maps and borders for three months during which there must be a complete halt to settlement activity," he said.

The peace talks hit a major stumbling block in late March after Israel refused to comply with a commitment to release 26 veteran Palestinian prisoners, prompting Abbas to resume moves to seek international recognition.

Abbas has repeatedly insisted that Israel release the two dozen detainees plus hundreds more and agree to a freeze on settlement activity.

He has also demanded comprehensive talks on the issue of borders.

But a senior Israeli official said there would be no further talks unless Abbas renounced a reconciliation pact signed last week with Gaza's Islamist Hamas rulers, under which the two rival Palestinian administrations would seek to form a new government of technocrats.

"The moment that Mahmud Abbas gives up the alliance with Hamas, a murderous organisation which calls for the destruction of the state of Israel, we will be ready to return immediately to the negotiating table and discuss all subjects," he told AFP.

On April 24, a day after the unity deal was announced, the Israeli security cabinet said it would not negotiate with any Palestinian government backed by Hamas, with Prime Minister Benjamin Netanyahu saying Abbas would have to choose between peace with the Islamist movement, or peace with Israel.

The timing of the intra-Palestinian unity agreement was criticised as "unhelpful" by Washington, although US officials are understood to have a wait-and-see attitude to the new government, Haaretz newspaper reported.

"It is clear that the administration also has a 'glass half full' view of the controversial deal between the two rival Palestinian factions," the paper said, quoting a top White House adviser who said it was not possible to make peace "with only a part of the Palestinian people."

Palestinians risk US aid freeze if Hamas join government
Washington (AFP) April 29, 2014 - Palestinian leaders risk forfeiting millions of dollars in US aid if they press ahead with plans to form a unity government including militant Hamas members, US lawmakers and officials warned Tuesday.

"Let me be utterly clear about our policy towards Hamas," Assistant Secretary for the Near East Anne Patterson told a House hearing.

"No US governmental money will go into any government that includes Hamas until Hamas accepts the Quartet conditions. And that's renouncing violence, recognizing previous agreements and most explicitly recognizing Israel's right to exist."

In a surprise deal Palestinian leaders from the West Bank and the Hamas-run Gaza Strip last week agreed to work together after years of bitter rivalry.

But the move has been denounced by Israel which has cancelled its participation in the peace talks. The deadline to achieve a deal expired Tuesday with US Secretary of State John Kerry's intensive months-long efforts in tatters.

In an address to PLO leaders on Saturday, Palestinian president Mahmud Abbas said the new government, which will be made up of political independents, would recognize Israel, reject violence and abide by existing agreements.

Under Wednesday's PLO-Hamas accord, Abbas would head an "independent government" of technocrats, to be formed within five weeks.

That new interim administration would be charged with holding parliamentary and presidential elections within six months of taking office.

"Let me be clear: No Palestinian government that includes terrorist members of Hamas can or will receive US funding," representative Ted Deutch told the hearing into the 2015 budget priorities for the Middle East and North Africa.

Sub committee chairwoman Ileana Ros-Lehtinen said the Palestinian reconciliation deal had "major implications" for the fiscal year 2015 budget, which begins in October.

The administration was "seeking over $440 million in direct bilateral assistance for the Palestinian Authority and the West Bank and Gaza," she said.

But US law is clear that "it cannot send funds to a Palestinian government that includes members of the terrorist group Hamas."

Hamas has been blacklisted by the US since 1993 as a terrorist organization.

But Patterson said that Abbas and the leadership of Hamas "hate each other."

"There is some thought that one way to get rid of Hamas is to hold an election because that's how they entered the political process and that's how Abu Mazen, President Abbas, should get rid of them."

She recalled though that previous reconciliation attempts had failed and stressed "the Palestinian Authority needs our support."