Israeli opposition to a complete freeze of settlement activity in the West Bank is likely to evolve into a stance that will lead to creation of a Palestinian state, Secretary of State Hillary Clinton said.

"If one looks at Israel's history, there have been prime ministers going back to the beginning of its statehood who have staked out positions which have changed over time," Clinton told reporters in Washington today after meeting with Israeli Foreign Minister Avigdor Lieberman.

Clinton said that through past negotiations, Israeli leaders "have moved to positions they never would have thought they could have advocated."

U.S. officials are trying to lay the foundations for talks between Israel and the Palestinian Authority as part of a broader regional peace effort.

The U.S. special envoy for the region, former Senator George Mitchell, said yesterday that Israeli Prime Minister Benjamin Netanyahu's acceptance of Palestinian statehood and the threat posed by Iran's nuclear program have created a "realistic" chance for Middle East peace.

Netanyahu said in a June 14 speech that a Palestinian state would have to be demilitarized and its establishment contingent on its recognition of Israel as a Jewish homeland and Jerusalem remaining the capital of Israel.

Clinton predicted a compromise on settlements was possible after Lieberman said his government "cannot accept" the principle of an absolute freeze.

"We must keep natural growth," he said, referring to marriages and deaths that compel changes in West Bank settlements that are a major impediment to a peace agreement with the Palestinians and Arab nations in the region.

By Bill Varner, Bloomberg, June 17, 2009