Direct negotiations on a final-status agreement opened yesterday at Sharm al-Sheikh, in the shadow of the ongoing dispute over a freeze on settlement construction in the West Bank and East Jerusalem.

Palestinian Authority President Mahmoud Abbas is threatening to quit the talks should Israel resume construction over the Green Line. Israeli ministers and coalition MKs are threatening to undermine the government's stability should it decide to extend the freeze at the end of this month. And the American government is seeking a wonder drug that would remove the settlement freeze from the agenda and cool the atmosphere in a manner conducive to substantive discussion of the conflict's core issues.

As a palpable illustration of the danger settlement expansion poses to the diplomatic process, the Interior Ministry's regional planning and building council for Jerusalem has just announced its intention to convene in the coming days to discuss a plan to build 1,362 housing units in the southern Jerusalem neighborhood of Givat Hamatos, which is beyond the Green Line. This announcement came just as Prime Minister Benjamin Netanyahu was conferring with Abbas in Sharm al-Sheikh. Thus once again, it appeared that Israel is not capable of stopping settlement activity.

The experience of the past year shows that with the help of goodwill and creativity on all sides, a formula can be found to restrain the expansion of settlements. Abbas has declared several times that he does not insist that Netanyahu publicly announce a settlement freeze; he would be content with a quiet pledge from Defense Minister Ehud Barak about a de facto freeze on construction in the West Bank.

Netanyahu needs to understand that the expansion of settlements cannot be reconciled with a two-state solution, which he promised to advance, and that his ability to stand up to right-wing pressure is a test of his leadership. The crisis over a building freeze during the negotiations is negligible compared to the challenges the prime minister will face in discussions of the core issues.

If, as he claims, Netanyahu wants to reach a final-status agreement within a year, he will soon have to make far more difficult decisions. If he does not want, or is unable, to confront his partners on the right over a temporary, partial freeze on building in the territories, how will he stand up to their pressure when the time comes to decide to evacuate dozens of settlements and tens of thousands of settlers?