By Matthew Kalman in Jerusalem
DAILY TELEGRAPH 10 Mar 2010
Palestinian President Mahmoud Abbas accused Israel of "the ruining of trust" and said there were questions over whether fresh negotiations could now take place.
Israel's announcement left visiting US Vice President Joe Biden deeply embarrassed after a day in which he had heaped praise and affection on the country's leaders.
Speaking in Ramallah after meeting Mr Abbas, he accused Israel of "undermining the trust that we need right now" and complicating efforts to restart peace talks with the Palestinians after a year in deep freeze.
Mr Netanyahu claimed he knew nothing about the announcement of the planned construction in a Jerusalem suburb in the occupied West Bank.
But it threatened to torpedo plans for indirect peace talks that should have crowned the first visit to the region by Mr Biden.
In Strasbourg, EU high representative for foreign affairs Baroness Ashton told the European parliament she wanted to "join Vice-President Biden in condemning the decision." UN Secretary General Ban Ki-Moon said settlement activity "undermines any movement towards a viable peace process."
Mr Abbas said Israeli policies "especially inside Jerusalem, threaten these negotiations" and demanded Israel cancel the construction plans.
Addressing the Israeli people directly, Mr Abbas said he was committed to a "permanent, lasting, comprehensive and just peace" and urged the Israeli government "not to waste the opportunity".
"I would like to tell them that time is right for peace based on two states, an Israeli state that will live in peace and security alongside a Palestinian state, based on the borders of June 1967 with Jerusalem as its capital," he said.
Mr Biden strongly endorsed the leadership of Mr Abbas and his prime minister, Salam Fayyad, even though their terms legally expired some time ago and they have little influence in the Hamas-controlled Gaza Strip.
He said the Obama administration was "fully committed to the Palestinian people and to achieving a Palestinian state that is independent, viable and contiguous," and "strongly supports the Palestinian Authority's efforts to build as well as strengthen its institutions and develop the economy of a state".
Lieut-Gen Keith Dayton, a US army officer, is training thousands of Palestinian paramilitary police and security forces loyal to Mr Abbas in a Jordanian training camp.
Mr Biden called on both sides to take "historically bold steps" to reach "a historic peace" but indicated it would not be easy.
"As we move forward, the United States will hold both sides accountable for any statements or actions that inflame tensions or prejudice the outcome of talks, as this decision did," Mr Biden warned in a clear rebuke to the Israelis. It was also an oblique warning to the Palestinians who plan to name a square in Ramallah on Thursday in memory of a Fatah terrorist who led an attack on an Israeli commuter bus in 1978 in which 37 Israelis were killed.