MIDDLE EAST:ISRAEL ANNOUNCED yesterday that it was planning to build close to 900 new homes in two neighbourhoods in disputed East Jerusalem, drawing an angry Palestinian response.
Housing minister Zeev Boim told the cabinet of plans to build 763 housing units in Pisgat Ze'ev and 121 in Har Homa. Both are Jewish neighbourhoods built in the eastern part of Jerusalem, which was captured by Israel during the 1967 war.
Jerusalem mayor Uri Lupolianski said the new apartments were needed to deal with what he called the "urgent need for housing for the Jewish population". A Housing Ministry spokesman linked the decision to Jerusalem Day, which is being celebrated today and is when Israelis mark what they call the "unification" of Jerusalem.
Furious Palestinian leaders said the move undermined peace talks, which were resumed last December with US backing. Palestinian prime minister Salam Fayad told the Associated Press that the construction "strips the political process of any meaningful content". He said he was "at a loss trying to really find reasons to be encouraged or optimistic".
Senior Palestinian negotiator Saeb Erekat said that Palestinian president Mahmoud Abbas would lodge a "major protest" with prime minister Ehud Olmert when the two leaders meet today. "At a time when we decide to go and meet with Mr Olmert and continue with the negotiations despite all the political difficulties in Israel, this should not have been done today," he said.
Palestinian officials like Mr Erekat say that continued settlement construction by Israel undermines moderate voices on the Palestinian side and bolsters support for more radical groups like Hamas.
The latest announcement comes as the Israeli prime minister, beset by corruption charges, is fighting for his political life. If Mr Olmert is forced to resign and the country goes to elections, talks with the Palestinians would be sidelined for months.
The Palestinians argue that construction in East Jerusalem undermines their demand that it serve as the capital of a future Palestinian state. Israel, which annexed East Jerusalem after capturing it in 1967 - the move has never been recognised by the international community - wants to keep large swathes of the eastern sector of the city in any future peace agreement.
Israeli leaders insist that large settlement blocs, including neighbourhoods like Har Homa and Pisgat Ze'ev, should remain under Israeli sovereignty in any peace deal with the Palestinians and therefore construction in these areas is legitimate.
In an exchange that might be a precursor to a broader deal, Israel yesterday released Nissim Nasser, who was convicted of spying for Hezbollah, and handed him over to Lebanon, while the Shia guerilla group handed over what it said were the remains of Israeli soldiers killed in the warfare in Lebanon in 2006.
There have been reports recently that a German-mediated deal is close to completion and would see Israel releasing several Lebanese prisoners in exchange for the return of two Israeli soldiers, Ehud Goldwasser and Eldad Regev, who were abducted by Hezbollah in July 2006 - the incident that sparked the fighting.
The working assumption in the Israeli defence establishment is that both soldiers were badly injured in the initial attack on their jeep on the Israel-Lebanon border and may not have survived. Hezbollah has not offered any proof that they are alive.
Hezbollah has demanded the release of Samir Kuntar, who has been in an Israeli jail since he infiltrated northern Israel in 1979 and killed a four-year-old girl, her father and two policemen.