Israel has set aside US$25 million ($36.3475 million) in the 2008 budget to expand the Maale Adumim settlement in the occupied West Bank and in the Har Homa settlement in annexed east Jerusalem, the anti-settlement group Peace Now's head Yariv Oppenheimer told AFP.
Israel's Pensioner Affairs Minister Rafi Eitan confirmed the report.
About 250 new housing units are to be constructed in Maale Adumim and 500 in Har Homa, known to Palestinians as Jebel Abu Ghneim, Peace Now said.
Palestinians warned that the move could hamper the peace talks revived at a November US conference after a near seven-year hiatus, with president Mahmoud Abbas calling settlements the most serious obstacle to the relaunched talks.
"We can't understand these frantic settlement activities at a time when we are talking about final status negotiations," Abbas was quoted as saying yesterday by Wafa, the official news service of the Palestinian Authority.
"We have begun negotiations and they face obstacles, the most prominent of which is the issue of settlements, which has held us back for so long," he said at a meeting of local Fatah leaders.
Coming ahead of US President George W Bush's planned visit to the region in January, Israel's announcement is likely to elicit criticism from its main ally that also blasted another settlement expansion several weeks ago.
The announcement came a day before Israeli and Palestinian negotiating teams, headed by Foreign Minister Tzipi Livni and former premier Ahmed Qorei, respectively, were to meet for their second round of talks since the two sides formally relaunched peace negotiations at the US conference in Annapolis.
Palestinians have demanded that Israel stop all settlement activity, as called for in the 2003 roadmap peace blueprint that both sides pledged to uphold when they renewed negotiations at the US conference.
The issue of settlements marred the first round of negotiations on December 12 as just a week before the talks, Israel invited bids for more than 300 new housing units in the Har Homa settlement.
The expansion was slammed by the Palestinians and criticised by the European Union and Washington.
Earlier this week, Israel dropped plans to expand another east Jerusalem settlement in a move US Secretary of State Condoleezza Rice called a "good step," saying the expansion could have undermined peace talks.
Palestinians have demanded that Israel stop all settlement activity, as called for in the 2003 roadmap peace blueprint that both sides pledged to uphold when they renewed negotiations at the US conference.
The internationally-drafted roadmap calls on Israel to freeze all settlement activity and on the Palestinians to impose law and order.
Israel does not consider the Har Homa project to be a settlement because it lies within the municipal boundaries of Jerusalem, drawn up by Israel after it captured and annexed the mostly Arab eastern half of the city in 1967.
But the international community has never recognised the annexation. (AFP)
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