Obama criticises Israel over settlement-building

Obama's criticism of a plan to build 900 new homes at Gilo near Jerusalem sent a strong signal of displeasure over Prime Minister Benjamin Netanyahu's pledge that the holy city would be excluded from any settlement limits sought by Washington.

But while Obama has been urging Israel to restrain settlement expansion, he has backed Netanyahu in rejecting Palestinian President Mahmoud Abbas's demand that settlement activity must stop before peace talks can resume.

In an interview in China, Obama was asked by Fox News about the planned construction in Gilo, a settlement of 40,000 Israelis built in a part of the West Bank that Israel captured in 1967 and annexed to Jerusalem.

"I think that additional settlement building does not contribute to Israel's security. I think it makes it harder for them to make peace with their neighbours," Fox quoted Obama as saying. "I think it embitters the Palestinians in a way that could end up being very dangerous."

Publication of an Israeli government planning commission's blueprint for Gilo on Tuesday also drew sharp rebukes from Europe and the United Nations, as well as from Palestinians who said it added to their despair over establishing a viable state.

Netanyahu has said he would limit new construction in West Bank settlements but that building in Israel's Jerusalem municipality would continue. This area includes East Jerusalem and adjoining areas of the West Bank which Israel annexed in a move which was not recognised internationally.

"Construction in Gilo has taken place regularly for dozens of years and there is nothing new about the current planning and construction," a Netanyahu aide said.

The Palestinians want a capital at Jerusalem for the state they hope to establish in the West Bank and Gaza Strip. They complain that Israeli settlement building around the city, such as at Gilo, between East Jerusalem and the West Bank city of Bethlehem, will cripple the viability of any state they set up.

An Israeli official said Netanyahu told cabinet members to adopt a less confrontational tone towards the United States after a deputy minister was quoted by an Israeli news Web site as accusing Washington of "behaving like a bull in a china shop."