* U.S. says failed to persuade Israel over settlements
* Egypt blames Israel for collapse of talks
By Marwa Awad
SHARM EL SHEIKH, Egypt (Reuters) - Israeli Prime Minister Benjamin Netanyahu meets the Egyptian president in Egypt on Thursday as part of an effort to revive Middle East peace talks.
Negotiations between Palestinians and Israelis broke down after Israel refused to extend a partial 10-month freeze on building settlements in the occupied West Bank, prompting the Palestinians to pull out. The freeze expired on Sept. 26.
The meeting in Egypt's Red Sea resort of Sharm el-Sheikh aims to nudge the peace process forward after the United States, which sponsored face-to-face talks, said in December it failed to persuade Israel to restrict settlement building activity.
Egyptian President Hosni Mubarak blamed Israel for the collapse of talks in a speech to parliament in December and called on the Washington to reinvigorate the process.
The Arab League said in December it rejected more talks without a "serious" peace proposal by Washington. [ID:nLDE6BE1QD]
An Egyptian official said Thursday's talks, which were to begin at 1200 GMT, aimed to help break an impasse in the peace diplomacy, but did not give details.
"I am going to speak with (Mubarak) about advancing peace and strengthening security. There are those who are trying to undermine the quiet, including various actors like Hamas and Hezbollah," Netanyahu said in a statement before the talks.
Egypt's ties with Lebanon's Hezbollah have been strained since the Shi'ite movement called Cairo a "partner in crime" with Israel against Palestinians in the Gaza Strip.
Cairo has convicted 26 men of planning militant attacks in Egypt and said they were linked to Hezbollah.
Egypt has also charged an Egyptian businessman and two Israelis with spying for Israel. [ID:nLDE6BJ0Y1]
A spokesman for Netanyahu, Ofir Gendelman, said when asked about the case: "These are baseless allegations. We have officially denied the rumour of an Israeli spy in Egypt."
An Israeli political source said the agenda in Sharm el-Sheikh was expected to include efforts to recover Israeli soldier Gilad Shalit, who was abducted in 2006 in a cross-border raid from Gaza, which is controlled by Palestinian group Hamas.
Direct Palestinian-Israeli talks were resumed in September after a 20-month hiatus, but unravelled three weeks later.
Palestinians had said renewing talks with Israel required a halt to building settlements on land where they aim to set up a future state, and a stop to Israeli building in East Jerusalem.
The status of Jerusalem, the borders of a future Palestinian state and the fate of Palestinian refugees are core issues Netanyahu and Palestinian President Mahmoud Abbas would have to resolve to reach a peace deal.
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