The New Nation - Internet Edition

AFP, Jerusalem

Israel will build 884 more houses in east Jerusalem, the housing ministry said on Sunday, in a move that enraged Palestinians who have demanded it as the capital of their promised state.

"After the weekly cabinet session (on Sunday) we will invite tenders for the construction of 121 housing units in Har Homa and 763 others in Pisgat Zeev," ministry spokesman Eran Sidis told AFP. The two neighbourhoods lie in Arab east Jerusalem, which Israel occupied and annexed after the 1967 war but which the Palestinians have demanded as their capital in recently revived US-backed peace talks. "These offers are being published for the occasion of Jerusalem Day, celebrating the 41st anniversary of the reunification of the city," Sidis said, referring to Israel's occupation of east Jerusalem in the Six Day War.

Jerusalem Mayor Uri Lupolianski defended the move, telling public radio it was necessary to address the "urgent need for housing for the Jewish population."

Palestinians slammed the decision, saying it undermined peace efforts and reflected mounting Israeli doubts over the political future of Israeli Prime Minister Ehud Olmert, who is facing new corruption allegations.

"We strongly condemn this decision, which is a continuation of similar decisions to expand settlements that have never stopped," Palestinian senior negotiator Saeb Erakat told AFP.

"This decision will affect all the efforts to continue the peace process. The situation is very difficult," he added.

Har Homa, which lies on the outskirts of the occupied West Bank town of Bethlehem, has been a flashpoint in the dispute over the city since its construction in the late 1990s.

The controversy over Har Homa was reignited when, less than a week after the two sides formally relaunched peace talks in the US city of Annapolis in November, Israel unveiled plans to build more than 300 new housing units there.

The latest planned expansions come on the eve of the next scheduled meeting between Olmert and Palestinian president Mahmud Abbas, who have pledged to try to strike a full peace deal by January 2009.