updated 12/23/2007 5:10:56 AM ET 2007-12-23T10:10:56

Prime Minister Ehud Olmert on Sunday ruled out cease-fire talks with Hamas, calling Israel's battle against the Islamic militant group that controls the Gaza Strip a "true war."

Separately, a Cabinent minister said Israel plans to build an additional 740 apartments in disputed east Jerusalem and the West Bank in 2008, a move sure to enrage Palestinians who say such construction undermines nascent peace talks.

The Construction Ministry's proposed budget for 2008 includes 500 apartments for the Har Homa neighborhood in east Jerusalem. Plans to build more than 300 apartments in that same neighborhood, announced earlier this month, upset the first round of negotiations Israel and the Palestinians conducted in seven years.

Struggle over Gaza
The Israeli army has been battling Hamas and other armed groups in Gaza that frequently fire rockets into southern Israel. The army appears to have made substantial gains in recent weeks, and Olmert told his Cabinet that there are no plans to slow down.

"Operations against terrorists will continue as they have been conducted for many months," Olmert said. "There is no other way to describe what is happening in the Gaza Strip except as a true war between the Israeli army and terror groups."

"This war will continue," he said, adding that Israel would continue to allow humanitarian aid into Gaza to protect the area's civilians.

Under heavy pressure from Israel's military gains and economic embargo, Gaza's Hamas rulers have signaled readiness in recent days for a cease-fire. Several Israeli Cabinet ministers have said the government should consider the offer.

Olmert said there can be no cease-fire until Hamas accepts three conditions set by the "Quartet" of international peace makers -- renouncing violence, recognizing Israel's right to exist and accepting past peace agreements between Israel and the Palestinians.

The "Quartet" consists of the U.S., the European Union, the United Nations and Russia.

"Whoever accepts the Quartet principles will, in principle, be a partner for negotiations," Olmert said. "Whoever isn't willing to do so, to our regret, cannot be a partner for dialogue with us. This policy will not change."

Hamas, which is committed to Israel's destruction, rejects the international conditions.

New apartments
The Construction Ministry's proposed budget for 2008 includes 500 apartments for the Har Homa neighborhood in east Jerusalem. Plans to build more than 300 apartments in that same neighborhood, announced earlier this month, upset the first round of negotiations Israel and the Palestinians conducted in seven years.

An additional 240 apartments are planned for construction in Maaleh Adumim just outside Jerusalem, one of Israel's biggest West Bank settlements, according to the ministry's budget. Israel intends to hold on to Maaleh Adumim, home to more than 30,000 settlers, in any final peace deal with the Palestinians.

Cabinet Minister for Jerusalem Affairs Rafi Eitan told Army Radio that Israel never promised to halt construction within the municipal borders of Jerusalem, whose eastern sector Israel annexed in 1967 after capturing it in the 1967 Mideast war.

The international community never recognized that annexation, but Jewish east Jerusalem neighborhoods -- home to 180,000 people -- are expected to remain in Israeli hands under any final peace settlement.

'Integral, organic part of Jerusalem'
"Har Homa is an integral, organic part of Jerusalem," Eitan said. "No promise was ever given to anyone that we wouldn't continue to build in Har Homa, because it's within the municipal borders of Jerusalem.

Maaleh Adumim, Eitan added, "is an integral part of Jerusalem in any peace accord."

Built on a hilltop known to Palestinians as Jebel Abu Ghneim, Har Homa is part of a network of Jewish neighborhoods in Jerusalem that ring Palestinian areas. Palestinians charge the Israeli goal is to cut Arab neighborhoods off from each other and stand physically in the way of making east Jerusalem the capital of a Palestinian state.

Reports earlier this month that Israel planned to build 307 apartments in Har Homa drew rare U.S. criticism, with Secretary of State Condoleezza Rice saying the construction would "not help build confidence" for peace talks.

Maaleh Adumim is one of three settlement blocs that Israel expects to retain in any peace accord. The Palestinians have expressed willingness to consider swapping land on which settlement blocs and Jewish east Jerusalem neighbhorhoods stand for equal amounts of Israeli land.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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