JERUSALEM (AFP) – Israel's Benjamin Netanyahu on Wednesday accused the Palestinians of creating "artificial crises" as he met with U.S. Secretary of State John Kerry, who is striving to rescue the fragile peace process.

The premier's remarks were made at the start of a meeting with Kerry at a Jerusalem hotel that lasted nearly three hours and came shortly after the Palestinians threatened to bolt the talks over a fresh row about settlements.

Kerry arrived in Israel late on Tuesday as rumors swirled that the US-brokered peace talks that resumed in late July had produced absolutely no sign of progress and were on the brink of collapse.

"I am concerned about (the talks') progress because I see the Palestinians continuing with incitements, continuing to create artificial crises, continuing to... run away from the historic decisions that are needed to make a genuine peace," Netanyahu said in remarks to reporters.

"I hope your visit will help steer them back to a place where we could achieve the historical peace that we seek," he retorted.

But Kerry sought to calm the situation, pleading for patience.

"We are three months into this negotiation... there are always difficulties, always tensions," he said.

"We need the space to negotiate privately, secretly, quietly."

Progress was possible with "a serious effort" on both sides, he said.  "I hope we will continue in the good faith that brought the parties together in the first place."

Although Kerry appears to be sticking to the ambitious nine-month timetable for reaching an agreement, he was careful to hedge his bets about the outcome.

"We have six months ahead of us on the timetable we have set for ourselves and I am confident we have the ability to make progress," he said.

After meeting Netanyahu, Kerry left immediately for the West Bank town of Bethlehem to attend an economic event before meeting with Palestinian president Mahmud Abbas.

Later in the afternoon, he was to meet Israeli President Shimon Peres then hold a second session with Netanyahu over dinner, officials said.

Just before Kerry's arrival on Tuesday, a meeting between the negotiators in Jerusalem broke down over recent settlement moves, with Israel advancing plans for some 3,700 new settler homes in the past week alone.

"The Palestinian-Israeli negotiations broke down during the session on Tuesday night," a senior Palestinian official told AFP, speaking on condition of anonymity.

The Palestinians have been outraged by Israeli claims that the settlement announcements were the result of tacit "understandings" between the two sides linked to the release last week of 26 veteran Palestinian prisoners.

"Israel claims there's a deal to continue settlement building in exchange for releasing the last batch of prisoners, but this is not true at all," he said.

"The Palestinian delegation reiterated to the American side its absolute rejection of these claims. But the Israeli side insists on continued settlement building, and we can't continue talks in light of this unprecedented settlement attack."

In a symbolic gesture, Kerry's first stop on landing was to visit the Tel Aviv square where the late Prime Minister Yitzhak Rabin was gunned down 18 years ago by a rightwing Israeli opposed to the peace talks.

"He dared to take the risks for peace, not just because it was important to take the risks, but that it was vital to secure the future of Israel and the region," Kerry said after laying a wreath.

Speaking to reporters later in Tel Aviv's Rabin Square, Kerry sent a clear message to Israel's leaders, urging them to seek peace "with the same determination Prime Minister Rabin showed.”

In recent days, three Israeli newspapers carried reports saying Washington was looking into drafting a US proposal for an interim agreement which would be presented to the sides early next year in order to move the negotiations forward.

But Kerry has flatly denied the existence of any new plan.

"Let me categorically dispel any notion that there is anything other than the track that is formally engaged in between Israel and the Palestinians," he told reporters in Riyadh on Monday.

"There is no other plan at this point in time."