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By Adam Entous

JERUSALEM, Feb 24 (Reuters) - After months of delay, Israel and the Palestinians set up teams of government experts on Sunday to try to jumpstart U.S.-backed peace talks that have so far shown little progress.

The teams will tackle a range of specific issues, from security to trade and water use, that would form part of any agreement on a Palestinian state, said Israel's Foreign Ministry spokesman, Arye Mekel.

The negotiations, which U.S. President George W. Bush hopes will yield an agreement before he leaves office next January, have been stalled by disputes, mainly over Israeli plans to build new homes near Jerusalem.

Mekel said the chief negotiators -- Israeli Foreign Minister Tzipi Livni and former Palestinian prime minister Ahmed Qurie -- would continue to focus on the final-status issues of statehood borders, the future of Jerusalem and Palestinian refugees.

Mekel said the experts, numbering approximately 10 from each side and drawn from government ministries, would meet separately from Livni and Qurie.

Palestinian negotiator Saeb Erekat declined to comment specifically on the teams except to say that "we bring whatever experts are needed".

The first final-status peace talks in seven years were launched by Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas at a U.S.-sponsored conference in Annapolis, Maryland in November, but the sides remain divided on what any statehood agreement should entail.

Olmert has said the goal was an understanding on "basic principles" for a Palestinian state, with implementation only once Abbas reins in militants in the occupied West Bank and the Hamas-controlled Gaza Strip as called for under the long-stalled "road map" peace plan.

Abbas, whose authority has been limited to the West Bank since Hamas Islamists seized Gaza in June, wants a full-fledged agreement allowing him to declare statehood.

Palestinian Prime Minister Salam Fayyad, France's foreign minister and top U.N. officials warned in recent weeks that the pace of negotiations was too slow to reach a statehood deal before the end of the year.

Israel has yet to meet its own commitments under the road map to halt all settlement activity and uproot Jewish outposts in the West Bank built without Israeli government authorisation.

Olmert has further angered the Palestinians by saying the thorny issue of Jerusalem would be postponed until the end of the negotiating process.

Israel considers Arab East Jerusalem, which it captured in a 1967 war and later annexed along with adjacent areas of the West Bank in a move that was never recognised internationally, as part of its "indivisible and eternal capital".

Palestinians want East Jerusalem to be capital of the state they hope to establish in the Gaza Strip and occupied West Bank. (Editing by Matthew Tostevin)

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