The mayor of Jerusalem has announced a plan to demolish an area of Arab East Jerusalem to make way for an upmarket district of hotels and gardens. But hours before Mayor Nir Barkat was due to announce his scheme - called the King's Garden - Prime Minister Benjamin Netanyahu said work should be delayed.
The Israelis say the Palestinian houses to be demolished have been built without permits and have become a slum. Palestinians say it is their land and want it to be part of their capital. Critics say the plan will inflame an already volatile situation in the area, the BBC's Heather Sharp in Jerusalem says.
Rights groups have warned that pushing ahead with the plan could trigger a fresh wave of violence, our correspondent adds.
Archaeology and the struggle for Jerusalem
But the public launch went ahead, with reporters invited to look at architects' models for the new tourist district, thought to be the location of a garden where the biblical King David wrote his psalms.
A spokesman for the US State department said the US "appreciates" Mr Netanyahu's intervention.
The US called on both sides to "refrain from unilateral actions that whether intended to or not, undermine trust and efforts to resume negotiations," Philip Crowley said. Mr Barkat called the plan a "bold move" and said it would be beneficial for both Palestinians and Israelis. "The plan is a win-win plan for the future of the city, taking into consideration the public and private interests, taking an area that has been neglected and turning it into an area that we can all be proud of," he said.
'Not outlaws'
The plan for the area near the Temple Mount, known to Palestinians as al-Bustan, will see 22 houses demolished. Journalists were invited to see architects' plans for King's Garden
The residents would be moved to an alternative location, the mayor said. Another 66 homes would be legally recognised and their residents given legal right to stay in the contested area. The mayor's office says that until 1967, when the Israelis occupied the land, the area was a park. Palestinians have built their houses illegally, and, without infrastructure, the neighbourhood has turned into a slum.
But Palestinians living there say it is their home. "It's our forefathers' land, Arab land, Muslim land, I refuse to give up this land," said Abu Mohammad, who has lived in the area for 17 years.
Moussa Owdeh, another local Palestinian resident, said: "We are not outlaws and we are not criminals. We are not violating construction permits, we have the natural right to be here, at this place, because this neighbourhood is our property." Israeli rights organisations said the plan could foment violent reaction from Palestinians.
"Any unilateral step on behalf of the Israeli authorities which aims to expand the Israeli grasp over this very sensitive area is very dangerous both to the political future of this city and the conflict in general," said Orly Noy, for Israeli human rights organisation Ir Amim. A statement issued by the prime minster's office said Mr Netanyahu was concerned that "parties interested in sowing discord" would present a "distorted picture" of the plan, news agency Reuters reported.
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