Clinton criticizes Israeli expanded building plan

WASHINGTON (AP) — Secretary of State Hillary Rodham Clinton on Wednesday criticized Israel's latest building plans in east Jerusalem, an issue that has divided the two governments and imperiled efforts to revive Middle East peace talks.

Clinton called the proposed construction of 1,300 apartments "counterproductive" and an obstacle to restarting peace talks with the Palestinians.

"The United States was deeply disappointed by the announcement of advance planning for new housing units in sensitive areas of east Jerusalem," Clinton told reporters at the State Department.

Her remarks came one day before she was scheduled to meet in New York with Israeli Prime Minister Benjamin Netanyahu, who earlier rejected President Barack Obama's criticism of the construction project.

Netanyahu's office issued a statement Tuesday that said "Jerusalem is not a settlement; it is the capital of the state of Israel," and insisted there was "no link" between the peace talks and its development plans for the city.

The Palestinians hope to make eastern Jerusalem the capital of a future Palestinian state as part of a peace deal. Israel captured east Jerusalem in the 1967 Mideast war.

The latest round of Israeli–Palestinian talks began in September after a nearly two year interruption, but they quickly stalled over the issue of settlement expansion.

Palestinians have said they will not resume the talks unless Israel halts construction of new housing in Jewish settlements in Israeli–occupied West Bank and east Jerusalem.

They have demanded that Israel renew a 10–month West Bank settlement slowdown that expired in late September — and add Jerusalem to it.

Clinton's criticism of the Israeli move came as she announced $150 million in additional U.S. aid to the Palestinian Authority Wednesday. The U.S. is trying to help the Palestinians create the government for their new state that would exist beside Israel, as envisioned in the peace talks.

The administration provided about $600 million in aid to the Palestinian Authority in its 2010 budget, and has asked Congress for authority to provide a similar amount in the 2011 fiscal year.

The money is part of U.S. and international support for Palestinian efforts to establish the basic institutions of a state, including a justice system and a viable economy.

Clinton credited Palestinian leaders with "reversing a history of corruption and producing results that actually matter and improve the lives of Palestinians," while cautioning that progress could stall without broad international support.

Clinton spoke from Washington via videoconference with Palestinian Prime Minister Salam Fayyad in Ramallah, the West Bank headquarters of the Palestinian Authority.

Fayyad thanked Clinton for the additional U.S. aid and was muted in his criticism of the latest Israel settlement construction plan. He called it "a very serious challenge and a problem for all of us," but he made no explicit mention of how it will affect prospects for resuming peace talks.

Egyptian Foreign Minister Ahmed Aboul Gheit also met with Clinton Wednesday and told reporters that his government is worried by the impasse.

"We feel that Israel is not doing what is required," he said. Egypt was the first Arab country to reach peace with the Jewish state.

Clinton said she and Aboul Gheit also discussed chances for a breakthrough in Iraq's effort to form a unity government following inconclusive national elections in March.