Israeli plans to build 1,100 new homes in and around Arab East Jerusalem came under fire on Tuesday from Palestinians who see the city as the capital of their future state, clouding already troubled peace talks.
Israeli officials cited "progress" after negotiators met for the first time on two consecutive days. But comments from ministers threatening new attacks on the Gaza Strip and vowing to expand Jewish settlements angered Palestinian leaders.
Israeli Prime Minister Ehud Olmert is under heavy pressure from both domestic opponents and rivals in his fragile coalition to take a tougher stance in Gaza and put off negotiations on the hotly contested issue of Jerusalem.
Criticized on both sides for a lack of progress since U.S. President George W. Bush helped relaunch long-stalled peace talks in November, the chief negotiators -- Israeli Foreign Minister Tzipi Livni and former Palestinian prime minister Ahmed Qurie -- met on Monday and Tuesday, Livni's spokesman said.
Olmert and Palestinian President Mahmoud Abbas started with the goal of reaching a statehood deal before Bush steps down next January. But Israel and the Palestinians are divided on what that deal should entail.
Abbas wants a full-blown agreement setting up a Palestinian state. Olmert said in Germany he hoped to reach "further understandings which hopefully will lead to a basis for an agreement between us and the Palestinian Authority".
Palestinians pointed to new signs of trouble on Tuesday when Israel's Housing Ministry said new housing tenders were being prepared: 750 near Jerusalem and up to 370 in what is known to Israelis as Har Homa and to Palestinians as Jabal Abu Ghneim.
Peace talks bogged down in December after Israel announced a previous plan for 307 units at Har Homa.
Palestinians have also expressed concern at Israeli threats to step up an offensive and kill senior Hamas Islamists in the Gaza Strip in what Israel says is a legitimate response to rocket fire on Israeli towns from the enclave.
"At the end of the day, violence will breed violence. It will add to the complexities," Abbas aide Saeb Erekat said.
Although Abbas's secular Fatah faction is deeply hostile to Hamas following the Islamists' seizure of Gaza in June, the president has been at pains to speak up for the 1.5 million people of Gaza suffering under an Israeli embargo on Hamas.
Israel is trying to make the case that it can maintain parallel tracks with the Palestinians, one aimed at reaching a deal with Abbas, the other at breaking Hamas.
HAMAS
Defence Minister Ehud Barak suggested on Tuesday that Israel would not immediately launch an all-out military campaign in the Gaza Strip. "It won't happen right away. There are reasons why we are not acting with full force right now. It will happen when the time is right," he said, without elaborating.
Olmert also cautioned: "There are no overnight solutions."
Frequent Israeli air strikes and ground incursions have killed hundreds of Palestinians in the past year but failed to prevent daily rocket fire that killed two Israelis last year and cost an 8-year-old boy part of his leg on Saturday.
Israel killed 65 Palestinians in Gaza last month, according to local medics who described 17 of them as civilians. Local officials say some 350 people were killed by Israeli fire last year and a similar number died in factional fighting. Israeli rights activists say Israel killed 290 Gazans in 2007.
The Islamists, shunned by the West for refusing to renounce violence, say they would cease fire if Israel stopped its military operations in Gaza and the occupied West Bank and ended the blockade that has cut supplies to the coastal territory.
Olmert's government has already lost one of its right-wing coalition partners over his embrace of the peace talks, and the religious Shas party has threatened to follow suit if the negotiations focus on the future of Jerusalem.
Its departure would cost Olmert his parliamentary majority and might trigger an election that would almost certainly end Bush's hope of a peace agreement before he leaves office.
Asked how Jerusalem will be dealt with in the talks, Olmert said: "It makes sense to keep some things for later."
Under U.S. pressure, Olmert has imposed a de facto halt to new building in Jewish settlements in what Israel regards as the West Bank, officials said. But he has not called off plans to build new homes in Har Homa and other West Bank areas Israel annexed to Jerusalem in a move not recognized internationally.
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