 The government is getting military help from Ethiopia |
With fears of war rising, Abdullahi Yusuf accused the Union of Islamic Courts (UIC) of close al-Qaeda links.
"We are no longer under the illusion that peace is possible with the UIC," he told reporters at his Baidoa base.
The UIC denies links to al-Qaeda and vowed to attack Ethiopian troops if they have not left Somalia by Tuesday.
Senior Islamist leader Sheikh Hassan Dahir Aweys said his movement would not target the interim Somalia government - just Ethiopian troops.
"Our country has been invaded by Ethiopia ... we should have thrown them out a long time ago."
Ethiopia denies it has soldiers in Somalia, but admits to having hundreds of military trainers in the country supporting the government.
President Yusuf accused the UIC of being the ones to close the door to peace talks.
"They are the ones who are waging the war. I don't see peace and I don't think they want peace.
"If there was something to offer them I would, but I am sure they have no intention for peace and therefore I have nothing to offer them."
Military build-up
Earlier, US Assistant Secretary of State Jendayi Frazer said radical forces had sidelined more moderate forces in the UIC, who were receiving funding from Eritrea, Yemen, Egypt and Saudi Arabia.
She warned against a military solution and said the way ahead should be through talks between the two sides.
But a UIC spokesman said the US was trying to derail the stability it had brought to much of Somalia this year.
Earlier on Friday, Islamic leaders Mogadishu distributed sermons about holy war to be read at the city's mosques during prayers.
Arab League-mediated talks were scheduled to take place next week in Khartoum, but now look unlikely.
The UIC has taken control of much of southern Somalia, including the capital, Mogadishu, since June.
The government only controls the territory around the town of Baidoa.
Last week, the UN Security Council approved plans to send peacekeepers to protect the government in Baidoa and amend an arms embargo, despite strong opposition from the UIC.
Correspondents say, however, that a military build-up on both sides makes it less likely that any peacekeepers will be deployed.
Both sides said this week that they have been sending troops to Tiyeglow, on the main road from the Ethiopia border to Baidoa, following clashes south-west of Baidoa.
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