The Palestinians' chief negotiator said Friday that a U.S. diplomat had warned of a cut in aid to the Palestinians if they proceed with a unilateral bid for statehood at the U.N in September.

The U.S. said that negotiator Saeb Erekat had mischaracterized the words of the U.S. consul-general in Jerusalem, but declined to comment further.

Israel and the U.S. strongly oppose the Palestinians' U.N. plan, saying Palestinian statehood should only be achieved through negotiations. They maintain that a Palestinian state must emerge from Israeli-Palestinian negotiations, which have been stalled for almost a year.

Erekat said the U.S. Consul-General in Jerusalem, Daniel Rubinstein, told him Friday that the U.S. Congress will take "punitive measures" if the Palestinians proceed with seeking U.N. recognition of statehood.

"It will stop granting the Palestinians its annual aid package" of about $470 million, Rubinstein said, according to Erekat.

"If the Palestinian Authority seeks to upgrade its position at the U.N. through the General Assembly then the American Congress will take punitive measures against the Palestinian Authority including halting American assistance," Erekat quoted the consul-general as saying.

Congressional Republicans and Democrats have warned that American aid to the Palestinians is in jeopardy over issues including the push for statehood at the United Nations, as well as ties to Hamas and unwillingness to restart negotiations with Israel.

Senior Obama administration officials have insisted that the assistance is critical to peace and stability in the Mideast and to boosting Palestinian security forces and the economy, and have cautioned that cutting off aid would have serious repercussions.

"The U.S sees no benefits from the Palestinian efforts to get membership at the U.N. and its better to reach peace agreements through negotiations," Erekat quoted Rubinstein as saying.

"If the Palestinian Authority insists on going to the Security Council, then the U.S. will use the veto," Erekat quoted him as saying.

Erekat told the consul-general he wishes the U.S. would reconsider its position.

The U.S Consulate in Jerusalem said that the remarks attributed to the Consul-General were not accurate, but would not elaborate further.

"While we cannot get into private diplomatic discussions, this report is not an accurate portrayal of the U.S position, nor did Consul-General Rubinstein make the comments reported in the media," a statement released by the consulate said. "As President Obama has made clear, initiatives through the U.N. will not bring about the two-state solution and enduring peace which both parties and the U.S seek, therefore we continue to oppose initiatives by the Palestinians in the U.N. There is no substitute for serious and substantive negotiations between the parties, and that remains our focus."

Palestinian President Mahmoud Abbas will meet with EU foreign policy chief Catherine Ashton on Saturday and will discuss the latest developments with her ahead ofa meeting of EU foreign ministers in Poland next week, Palestinian officials said.

The U.N. vote is largely symbolic. The Palestinians believe it will send a powerful message to Israel. The Palestinians say they are assured nonmember state status if they turn to the General Assembly. A resolution by the General Assembly, however, would have little more than symbolic value because it would not be legally binding.

Palestinians are planning mass demonstrations across the West Bank and abroad to coincide with the September U.N. General Assembly session, which they hope will give official endorsement for their state. The statehood initiative reflects frustration with long-stalled Israeli-Palestinian peace negotiations.

The latest round of talks was launched last year, but they collapsed three weeks later when Palestinians pulled out over a dispute about Jewish construction in the West Bank and east Jerusalem _ areas the Palestinians envision as part of their future state.

Israel maintains that the issue of settlements will be solved once there are agreed-upon borders and repeatedly called on the Palestinians to resume talks in order to reach an agreement.

Palestinians have been pursuing their U.N. bid since negotiations broke down.