(CAIRO) - Arab League chief Amr Mussa said on Saturday there were no high hopes for a peace deal between Israel and the Palestinians this year, warning that time was being lost.

"There is no great expectation that there will be an agreed solution to the Arab-Israeli conflict," Mussa told reporters after talks in Cairo with EU foreign policy chief Javier Solana.

He said the status quo was causing "despair in the Middle East as a whole."

"This is what we discussed, particularly in the context of the promises made by US President George W. Bush regarding the year 2008 and the results of the Annapolis meeting."

Peace talks between Israel and the Palestinians were launched at a US-sponsored conference in Annapolis in November with the goal of reaching a comprehensive peace deal by the time Bush leaves office in January 2009.

But the two sides remain sharply divided on the core issues of the conflict, despite several meetings in recent months between Israeli and Palestinian negotiators.

"The negotiations are not heading in a productive direction and the Palestinians' situation is not reassuring," Mussa said, warning that "time is being lost."

Differences focus on the future status of Jerusalem, final borders, the fate of some 4.6 million UN-registered Palestinian refugees and the future of Jewish settlements on Israeli-occupied territory.

On August 31 a senior Israeli government official said his country wants to reach a peace deal with the Palestinians by the end of the year but postpone a final agreement on the future of Jerusalem.

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