Housing Minister Ze'ev Boim said Monday that the decision to build hundreds of new apartments in the East Jerusalem neighborhoods of Pisgat Ze'ev and Har Homa was approved by Prime Minister Ehud Olmert.

Tenders were issued for the construction of 884 homes last week. Both the White House and the United Nations on Monday expressed concern over the plans to build in eastern parts of the Jerusalem municipality, due to the obstacles such construction pose for peace talks with the Palestinians.

Boim said that the apartments will all be built within the municipal borders of Jerusalem. He added that while Jerusalem must remain united, solutions must be found for the large Arab population in the city.

Boim also said that no decision has been made to build in the controversial E1 area between Jerusalem and the settlement of Ma'ale Adumim, because it would disrupt the territorial contiguity between the north and south West Bank.

Meretz MK Zehava Gal-On said Monday that Boim and Olmert's decision to issue the tenders reveals the true nature of the current government, which talks about peace, but in fact is sabotaging any chance of a future agreement.

On Monday, White House spokeswoman Dana Perino told reporters at a press briefing that "our position on the settlements is that we don't believe that any more settlements should be built, and we know that it exacerbates the tension when it comes to the negotiations with the Palestinians."

According to a transcript released by the White House, Perino also said that the expansion of existing settlements "is part of the problem in terms of Palestinians feeling that that is not acting in good faith when it comes to their negotiations."

United Nations Secretary-General Ban Ki-moon on Monday stated that he was "deeply concerned" about the move by Israel.

Ban, in a statement issued by his spokesperson, said he was "deeply concerned at the recent announcement by the Israeli government to invite new tenders for construction in Israeli settlements in East Jerusalem."

"The Government of Israel's continued construction in settlements in the occupied Palestinian territory is contrary to international law and to its commitments under the Road Map and the Annapolis process," the statement said.

On Sunday, Israel announced plans to build approximately the new housing units in an area of the occupied West Bank the government considers part of Jerusalem.

The two areas are Pisgat Ze'ev and Har Homa, an area Palestinians refer to as Jabal Abu Ghneim.

Housing Minister Zeev Boim instructed his office to publish a tender to build additional housing units in the two areas as steps meant to "strengthen Jerusalem."

Palestinian President Mahmoud Abbas condemned the plans at a meeting on Monday with Olmert.

"Differences were deep and strong in this area," Abbas aide Saeb Erekat said of the settlement issue, which has dogged U.S.-sponsored peace talks since they were launched in November.

The two leaders met on Jerusalem Day, Israel's celebration of the reunification of the city, which had been divided into Israeli and Jordanian sectors from Israel's establishment in 1948 until the 1967 Six Day war.

Earlier in the day, Abbas denounced settlement construction at a joint news conference at his West Bank headquarters with visiting German Foreign Minister Frank-Walter Steinmeier.

"If Israel does not stop these settlement activities, then it is difficult to reach a peace agreement," Abbas said at a joint news conference at his West Bank headquarters with visiting German Foreign Minister Frank-Walter Steinmeier.

Steinmeier urged both sides to refrain from anything that would hinder an agreement.

"This includes violence, such as rocket attacks from Gaza at Israel," he said. "However, this also includes settlement construction, which makes your [Abbas'] current talks with Prime Minister Olmert anything but simple."

The announcement of the planned construction in East Jerusalem came just ahead of Prime Minister Ehud Olmert's meeting this week with U.S. President George W. Bush in Washington as part of a three-day visit. Olmert has praised the housing plan.

The United States, as well as the Palestinians, have called for a halt to settlement expansion.

Olmert, in keeping with the previous government's policy, has vowed to keep West Bank settlement blocs, including areas near Jerusalem, under any future peace accord.

The 2003 peace "Road Map," reaffirmed by Israeli and Palestinian leaders at a conference hosted by Bush last year in Annapolis, Maryland, requires a halt to all settlement activity on occupied land where Palestinians seek statehood.

Both of the areas slated for construction are located on lands conquered by Israel during the 1967 Six Day war, and were incorporated into the municipal borders of Jerusalem in an act not recognized internationally.

Israel regards all of Jerusalem as its capital. Palestinians want East Jerusalem to be the capital of a state they hope to establish in the West Bank and Gaza Strip.