JERUSALEM - Israel on Wednesday fended off growing criticism that its move to build hundreds of new homes in annexed Arab east Jerusalem undermines US-led efforts to relaunch Middle East peace talks.
Interior Minister Eli Yishai defended his ministry's decision the previous day to approve the construction of 900 new housing units in east Jerusalem, which Israel considers an integral part of its capital and the Palestinians want to make the capital of their promised state.
"Freezing construction in Gilo is just like freezing construction... in any other neighbourhood in Jerusalem and Israel," Yishai told AFP. "Construction in Jerusalem cannot be halted, and Gilo is in Jerusalem."
Opposition leader Tzipi Livni, who opposes the government's peace policy, agreed, saying that "Gilo is part of an Israeli consensus... (and) understanding this is important for any future discussion on permanent borders in a future peace agreement."
Gilo is one of a dozen Jewish settlements in the eastern part of the Holy City, which Israel has annexed in a move not recognised by the international community.
The move to expand it was likely to further hamper Washington's so-far futile efforts to get Israel and the Palestinians to restart their peace talks, which were suspended during the Gaza war at the turn of the year.
France and Saudi Arabia added their voice to the chorus of criticism of the decision to expand Gilo, a move that flew in the face of Palestinian calls for a complete freeze on all settlement activity for peace talks to resume.
"It is a decision that we regret," French Foreign Minister Bernard Kouchner said in Jerusalem hours before he was to meet with Prime Minister Benjamin Netanyahu and other senior officials in Jerusalem.
"We have to restart with the political discussions," he said.
Saudi Arabia branded the move as "a major obstacle in the way of the peace process."
"Unless there are decisive measures taken in regard to these policies, it is too difficult to advance the peace process," foreign ministry spokesman Osama Nugali told AFP.
In three hours of talks late on Tuesday, visiting French President Nicolas Sarkozy and Saudi King Abdullah "were agreed on the need for rapid steps to relaunch the peace process," an official of the French presidency told AFP.
Washington was quick to say that it was "dismayed" at the decision.
"At a time when we are working to relaunch negotiations, these actions make it more difficult for our efforts to succeed," said White House spokesman Robert Gibbs.
Israeli news reports said that Netanyahu had rejected a request from his US ally to halt construction in Gilo, but it was not clear whether the request concerned the project approved on Tuesday.
UN chief Ban Ki-moon also slammed the move, saying it "undermined efforts for peace and cast doubt on the viability of the two-state solution."
Britain also condemned the decision, calling it "wrong" and reiterating that a credible peace deal would have to include Jerusalem as a "shared capital."
The Palestinians lashed out at the decision, with chief negotiator Saeb Erakat saying "settlements must be stopped, that is the only way back to a real peace process."
Israel captured east Jerusalem during the 1967 Six Day War and later annexed it in a move not recognised by the international community. It views the entire Holy City as its "eternal, indivisible" capital and does not consider Jewish neighbourhoods in the eastern part as settlements.