IMAGE: HAR HOMA
Menahem Kahana  /  AFP-Getty Images
Cranes dot the skyline of the controversial Jewish settlement of Har Homa in East Jerusalem on Feb. 18.
updated 3/17/2008 6:12:55 PM ET 2008-03-17T22:12:55

Prime Minister Ehud Olmert said Monday that Israel would keep expanding a Jewish neighborhood in eastern Jerusalem, defying international criticism and triggering a new spat with the Palestinians ahead of a fresh round of peace talks.

Israel plans to build hundreds of new apartments in Har Homa, a neighborhood in the section of Jerusalem claimed by the Palestinians. The U.S. has said such construction is unhelpful to peace efforts, and the Palestinians say the project is undermining peace talks.

Olmert called Har Homa an "inseparable" part of Jerusalem. He said Israel would continue building in those areas of Jerusalem, including Har Homa, that it expects to keep under a final peace agreement.

"Everyone knows that there is no chance that the State of Israel will give up a neighborhood like ... Har Homa," Olmert said in a joint news conference with visiting German Chancellor Angela Merkel.

The fate of Jerusalem is the most contentious issue in Israeli-Palestinian peace talks, which were relaunched last November after seven years of fighting. Israel captured east Jerusalem in the 1967 Mideast war and annexed it to its capital.

The Palestinians claim east Jerusalem as the capital of a future independent state that would also include the West Bank and Gaza Strip, other areas captured by Israel in the 1967 war.

Under the U.S.-backed "road map" peace plan, Israel must stop construction in Jewish settlements, while the Palestinians must disarm militants.

Some 250,000 Israelis live in the West Bank, along with 180,000 Israelis in Jewish neighborhoods of east Jerusalem. The U.S. says the Jewish neighborhoods in east Jerusalem must also be considered settlements. Israel withdrew from Gaza in 2005.

U.S. intervention sought
Palestinian negotiator Saeb Erekat reiterated that Israel must halt all settlement construction, including in Jerusalem.

"If they really want the year 2008 to be a year of peace, then this cannot be achieved with the continuation of settlement activities," Erekat said.

He called for U.S. intervention. Washington has agreed to monitor Israeli and Palestinian compliance with the "road map" peace plan.

Olmert has promised not to build any new settlements, but said Israel expects to maintain control of the Jewish neighborhoods of east Jerusalem and major settlement blocs in the West Bank as part of a final peace deal. Construction in these areas has continued.

Merkel said she had raised the issue of settlement construction with Olmert and noted that halting settlement activity is part of the road map.

Olmert also announced that peace talks would resume later Monday. The Palestinians had suspended the negotiations early this month to protest a bloody Israeli offensive in the Gaza Strip.

Israel hopes to reach a peace deal with the moderate government of Palestinian President Mahmoud Abbas in the West Bank by the end of the year. At the same time, Israel has been battling Abbas' rival Hamas, which controls the Gaza Strip. The Islamic militant group Hamas seized control of Gaza last June from Abbas' forces.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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