The first round of peace talks following a U.S.-backed Mideast peace conference in Annapolis, Maryland, was held on December 12, and was stalled by Palestinian demands that Israel drop plans to build 307 new homes in an area near Jerusalem.
The new round of talks on Monday, headed by Israeli Foreign Minister Tzipi Livni and former Palestinian prime minister Ahmed Qurei, was overshadowed by media reports that Israel's construction ministry was considering a proposal to build an additional 500 homes in Har Homa (Jabal Abu Ghneim), in East Jerusalem, and 240 in the Maale Adumim settlement.
The negotiations turned into an exchange of accusations with Quirei quoted as saying: "You [the Israelis] have to choose between the track of peace and negotiations, or the track of settlements. You can't have both."
The roadmap settlement plan proposed by international mediators in the Middle East peace process requires Israel to halt the construction of settlements in occupied Palestinian territories.
However, Tel Aviv insists the requirement does not extend to East Jerusalem - touted as the capital of any future Palestinian state. The Israelis are against the separation of Jerusalem, but have agreed to continue talks on the city's status with the Palestinians.
Meanwhile, Israel criticized the Palestinian government for its lack of action in preventing rocket attacks by Hamas militants on Israeli settlements bordering the Gaza Strip.
Israeli Prime Minister Ehud Olmert on Sunday ruled out talks with Hamas until the militant group recognizes Israel, renounces violence and complies with Israeli-Palestinian accords reached earlier.
The Israeli military has recently intensified operations in Gaza, killing more than 20 Palestinian militants in the past week in retaliation for continuous rocket and shell attacks launched from the enclave.
At the Annapolis conference in November, Ehud Olmert and Palestinian President Mahmoud Abbas set the goal of reaching a Palestinian statehood deal before the end of 2008. The two leaders are expected to meet later this week to try to salvage talks launched at the peace conference.
However, it is not clear how the statehood deal can be implemented, while the Palestinian territories are still divided between Abbas's Western-backed government in the West Bank and a rival Hamas administration running the Gaza Strip.
U.S. President George W. Bush will make a tour of the Middle East between January 8 and 16 in an attempt to boost the peace process in the region. He will visit Israel, the West Bank, Kuwait, Bahrain, the United Arab Emirates, Saudi Arabia, and Egypt.
