Far from Israel's behavior over east Jerusalem being the cause of the breakdown in talks, it's the Palestinians who have come up with east Jerusalem as a figleaf for their rejection of talks.
The Palestinians' refusal to countenance real talks unless Israel freezes building in east Jerusalem is simply a ruse. For 16 years after the Oslo accords, such building was never an issue. The real reason why the Palestinians have landed on an east Jerusalem freeze as a prerequisite is because they no longer want negotiations with Israel, or the U.S.
U.S.-Engineered Deadlock -Jackson Diehl
[F]or the second time in a year, the Middle East peace process has been stalled by a U.S.-engineered deadlock. U.S. and Israeli negotiators worked until 3 a.m. Wednesday in an attempt to come up with a formula that would allow the talks to go forward. So far, no luck.
Obama added more poison to the U.S.-Israeli relationship when he refused to allow non-official photographers to record his meeting with Netanyahu, and no statement was issued afterward. Netanyahu is being treated as if he were an unsavory Third World dictator, needed for strategic reasons but conspicuously held at arms length.
That is something the rest of the world will be quick to notice.
A new administration can be excused for making such a mistake. That's why Obama was given a pass by many when he made exactly the same mistake last year. The second time around, the president doesn't look naive. He appears ideological - and vindictive.