SIRTE, Libya (Reuters) - Arab leaders failed at their summit on Sunday to reach a consensus on whether the Palestinians should resume stalled talks with Israel.

The Arab League scheduled an extraordinary summit for later this year to tackle issues it had been unable to resolve during its two days of meetings in the Libyan city of Sirte.

The Palestinians have said indirect talks with the Israelis will not take place unless Israel cancels a decision to build 1,600 new homes in a settlement near east Jerusalem, dealing a fresh blow to an already troubled Middle East peace process.

The Arab League had given its blessing to the Palestinians, before the Israeli decision was announced, to conduct the so-called proximity talks with Israel, so the organisation's stance now on whether those negotiations should still go ahead is potentially decisive.

After two days of talks in the Libyan town of Sirte, a committee of foreign ministers from some member states produced a resolution saying that a halt to all settlement activity was necessary for Israeli-Palestinian negotiations to go ahead.

But that decision was not adopted by the full summit and, in a sign of the lack of consensus, Syria's foreign minister said his country would not recognise the document as representing the view of the Arab League.

Arab League Secretary-General Amr Moussa said after the summit ended that another, extraordinary meeting of heads of state would take place at an unspecified date later in the year to deal with outstanding issues.

He acknowledged the urgency of taking a collective decision on the Israeli-Palestinian talks.

"Within the next few weeks we have to decide what to do: whether to continue with the negotiations or to completely shift course," he told a news conference.