By Jeffrey Heller

JERUSALEM (Reuters) -Israel will lend the cash-strapped Palestinian Authority more than $150 million after the sides held their highest-level meeting in years, Israeli officials said on Monday, while playing down prospects of any major diplomatic breakthrough.

Defense Minister Benny Gantz, who has overall responsibility for the Israeli-occupied West Bank, travelled to the Palestinian self-rule area of the territory for previously undisclosed talks on Sunday with President Mahmoud Abbas.

A source close to Israeli Prime Minister Naftali Bennett said the premier had approved the Gantz-Abbas meeting and deemed it a “routine” matter. “There is no diplomatic process with the Palestinians, nor will there be one,” the source told Reuters.

U.S.-sponsored talks on founding a Palestinian state stalled in 2014. The Gantz-Abbas meeting took place as Bennett, a nationalist who opposes Palestinian statehood, returned from his first talks with U.S. President Joe Biden in Washington.

PA official Hussein Al Sheikh said the talks with Gantz included “all aspects” of Palestinian-Israeli relations.

Abbas coordinates West Bank security with Israel. Both sides are wary of Hamas Islamists who seized the Gaza Strip, another Palestinian territory, from Abbas in 2007.

But Israel chafes at stipends the PA pays to militants jailed or killed in attacks on Israelis. In a protest measure, the Bennett government last month withheld $180 million from 2020 tax revenues it collected on behalf of the PA. A Gantz spokeswoman said that policy was unchanged.

The 500 million shekel ($155 million) loan was meant to help “with vital PA functions” and would be repaid in 2022 out of future tax revenues collected by Israel, the spokeswoman said.

A White House statement said Biden, during his talks with Bennett on Friday, reiterated his support for a two-state solution to the Israeli-Palestinian conflict and “underscored the importance of steps to improve the lives of Palestinians”.

Bennett did not mention Palestinians in public remarks at the White House that focused largely on arch-enemy Iran’s nuclear program.

Gantz, a centrist in Bennett’s coalition government, has called in the past for resumption of a peace process with the Palestinians, who aspire to a state of their own in the occupied West Bank and Gaza Strip, with East Jerusalem as its capital. Israel captured those territories in the 1967 Middle East war.

But any renewed movement on the issue could shake the foundations of Bennett’s government of left-wing, rightist, centrist and Arab parties that in June ended the conservative Benjamin Netanyahu’s 12-year run as prime minister.

In a sign of friction within the coalition, Mossi Raz, a legislator from the left-wing Meretz party, said dismissal of prospects for renewed peace talks by the Bennett source was “outrageous.”

“A peace process is an Israeli interest,” Raz wrote on Twitter.

(Additional reporting by Dan Williams and Ali Sawafta; Editing by Angus MacSwan and Howard Goller)