US Secretary of State John Kerry reaffirmed on Wednesday Washington's position that Israeli settlement activity in the occupied Palestinian territories is "illegitimate."

"We consider now, and have always considered, the settlements to be illegitimate," Kerry said, after talks in Bethlehem with Palestinian President Mahmud Abbas focused on shoring up the peace negotiations.

"I want to make it extremely clear that at no time did the Palestinians in any way agree, as a matter of going back to the talks, that they could somehow condone or accept the settlements," Kerry said.

"That is not to say that they weren't aware - or we weren't aware - that there would be construction," he added.

His remarks related to a bitter row that has erupted over Israeli moves during the past week to push ahead with construction of more than 3,700 new settler homes.

Several Israeli officials have claimed the settlement announcements were in keeping with tacit "understandings" between the two sides linked to the release last week of 26 veteran Palestinian prisoners.

Their comments sparked furious denials from the Palestinians.

"The Palestinians believe the settlements are illegal. The United Sates continue to believe the settlements are not helpful," Kerry said.

A previous round of direct talks collapsed in September 2010 in an acrimonious row over settlements, with the Palestinians refusing to negotiate while Israel builds on land they want for a future state.

After six months of shuttle diplomacy, Kerry managed to coax the two sides back to the table in late July. But already tempers are fraying, once again.

Kerry on Wednesday unveiled $75 million in new aid to the Palestinians, aimed at building roads, schools and health clinics.

The money brings the total US contribution to some $100 million.

AFP