January's Palestinian parliamentary elections have been plunged into crisis after Israel decided to prevent Palestinians in Jerusalem from voting.
Mr Shaath's Fatah party faces a strong challenge from Hamas
Israeli prime minister's spokesman Raanan Gissin told the BBC it was concerned that the Palestinian militant group Hamas might gain power.
The Palestinian Authority condemned the decision and said it would cancel the poll if voting in Jerusalem is barred.
This election will be only the second since the PA was established in 1995.
Press reports also suggest that head of Egyptian intelligence, General Omar Suleiman, who met Palestinian President Mahmoud Abbas on Wednesday, is attempting to persuade Mr Abbas to postpone the vote.
Gen Suleiman has reportedly passed on a warning from the US and the EU that aid to the Palestinian Authority would be suspended if Hamas were to make big gains and become part of the future Palestinian government.
Palestinian Information Minister Nabil Shaath said that if there was no voting in Jerusalem, "there will be no elections at all".
"For us, Jerusalem is more important than any other thing," he added.
Scheduled for 25 January; originally set for July 2005
132 members elected to Palestinian Legislative Council (PLC)
Fatah and Hamas are main contenders
First time Hamas participates in parliamentary poll
Israel says Hamas cannot take part under a 1995 agreement
Last parliamentary elections held in 1996
Chief Palestinian negotiator Saeb Erekat said the 25 January election would be sabotaged if Palestinians resident in East Jerusalem were prevented from voting.
"If these elections don't take place, it will be a catastrophe for the Palestinians," he said.
"I know what the Israelis have on their minds. They don't want a partner. They want unilateralism."
Hamas spokesman Sami Abu-Zuhri has told reporters that his group wants the election held as scheduled.
Mr Gissin told the BBC that the Israeli government had changed its stance since last January's presidential election, when voting had been permitted.
Under special voting arrangements for East Jerusalem - which Israel has annexed and sees as its exclusive domain, while international law decrees it to be occupied territory - Palestinians have previously been allowed to vote in Israeli post offices.
Mr Gissin said these had been exceptions, and stressed the government would not help what he called a terrorist organisation, Hamas, come to power.
In October, Israel pulled back from a policy of opposing the participation of Hamas in January's elections.
Israeli Justice Minister Tzipi Livni said it was not in Israel's interest to oppose Hamas' participation.
Israeli Prime Minister Ariel Sharon had said earlier that his government would hinder voting in the West Bank if Hamas candidates stood in the election.
Israeli officials have warned that the peace process will end if Hamas becomes the dominant Palestinian political party.
Hamas' charter commits it to the destruction of Israel, and the group has been responsible for most of the suicide attacks inside Israel.
The largest and most popular militant group, Hamas has not previously contested parliamentary elections.
The group is expected to perform well in the January poll having won a sweeping victory in municipal elections in the West Bank last week.
Hamas was also successful in the three previous rounds.
The BBC's Arab affairs analyst, Magdi Abdelhadi, says that Mr Abbas will find himself in a difficult situation if he postpones the poll for the second time.
The legislative elections were originally scheduled for July, but the president postponed them until next year.
Doing so again could anger Hamas, which had made its truce partially conditional on the legislative elections being held on time.
But holding the election on time in January could also prove disastrous for Mr Abbas's Fatah party, our correspondent says.
A long simmering power struggle between the old guard and the younger generation has split Fatah.
Marwan Barghouti formed a rival faction for the elections last week, and now commentators speak of a real possibility that Hamas could beat the weak and discredited Fatah at the ballot box.