LONDON (AP) – The Middle East peace Quartet urged Israel on Friday to cease all settlement activity in the West Bank and called for more negotiations in the Israeli-Palestinian conflict.

There were no signs of a breakthrough, but U.S. Secretary of State Condoleezza Rice said an agreement on the creation of an independent Palestinian state remains possible during U.S. President George W. Bush’s waning days in office. “It’s hard work and it’s labor intensive and I know there’s skepticism, but I think they do have a chance to get an agreement by the end of the year and that’s what we’re going to work for every day,” she said.

Rice cited Northern Ireland as an example of a conflict that seemed intractable until just before peace was achieved.

The meeting in London of diplomats from the “Quartet” the U.S., Russia, the European Union and the United Nations, was scheduled to be followed by a meeting of donors to the Palestinian government.

Rice said Arab countries that have pledged money to the Palestinian Authority, but not delivered will be prodded to come up with the funding they have promised.

Last year, a Paris donor meeting netted US$7.7 billion (¤4.9 billion) in aid pledges to the Palestinians over three years. The money was earmarked both for the Palestinian budget and reform and development programs. The optimism that surrounded the pledges has long since faded. “Clearly when you make a pledge you ought to fulfill it, and that will be my message,” Rice said.

According to U.S. figures, only US$215 million (¤138.35 million) out of roughly US$835 million (¤537.32 million) pledged by Arab League nations has actually been handed over to the Palestinians, with the shortfall contributing to the economic and humanitarian crisis in the occupied territories.

Former British Prime Minister Tony Blair, a special Quartet envoy to the region, is focusing on the economic crisis. He expressed frustration Friday at the slow pace of negotiations with the Israeli government on agreements to lift roadblocks and checkpoints in the West Bank so normal business activity can resume.

“These past few months, we’ve been working on a series of proposals to improve conditions on the West Bank in particular,” he said. “These are economic project, lifting access restrictions, trying to build a better life for ordinary Palestinians. I hope in the next few weeks to get a response from Israel.”

Blair is also meeting with private sector businessmen in an effort to drum up investment in the West Bank, where economic growth has been stalled by the frequent outbreaks of violence and the difficulty of travel throughout the region.

With Blair’s help, the struggling Palestinian government is organizing an investment conference in Bethlehem on the West Bank later this month. The meeting is designed to showcase moneymaking possibilities in the region for investors willing to gamble on the possibility of improved security conditions.

Senior diplomats issued a statement calling for more Israel-Palestinian negotiations and an end to attacks from both sides.

U.N. Secretary-General Ban Ki-moon, reading the statement after the Friday morning meeting, said the Quartet “expressed its deep concern” at Israel’s continued settlement building on the West Bank and called for all outposts built since March 2001 to be dismantled. Israeli Foreign Ministry spokesman Arye Mekel said the Jewish state was not building new settlements and was only allowing “natural growth” in existing settlements. “We have not changed our position on this,” he said.

The written statement by the Quartet members read out by Ban explicitly states that “natural growth” of the settlements is unacceptable. He also expressed concern over worsening humanitarian conditions in the Gaza Strip.

A separate meeting will be held Friday afternoon to discuss the crisis over Iran’s continuing nuclear development program. Diplomats said they will discuss what to do next in an effort to persuade the Iranian government to drop its nuclear ambitions.