President Shimon Peres told visiting European Union foreign policy chief Catherine Ashton on Thursday that Israel reserved the right to build in Jerusalem, adding that its construction policy in the capital has not changed in 40 years.

Peres told Ashton that Israel allowed construction in Jewish areas of the capital, but not in neighborhoods heavily populated by Arabs ? a policy held by all previous government, he said,

This policy was carried out in accordance with all relevant parties including the Palestinians, he said, and has never interfered with the peace process.

He added that Israel would continue this policy and called for a quick resumption of peace talks so that borders between Israel and future Palestine could finally be set.

Meanwhile, United Nations Secretary-General Ban Ki-moon said on Thursday that the Israeli and Palestinian leaderships have no alternative to eventual direct negotiations, repeating criticism of Israel's decision to allow the construction of 1,600 new homes in East Jerusalem.

Ban said he hoped a meeting of the international "quartet" of Middle East mediators in Moscow on Friday could advance troubled peace efforts at a crucially important time.

The construction plans have sent sparks flying between Israel and the United States, and cast doubt on U.S. plans for indirect "proximity" talks.

Underscoring the problems in getting peace efforts back on track, Ban said that indirect talks between Israel and the Palestinians in themselves were "not the best scenario".

"It is still worth a try," he told Ekho Moskvy radio. However, he added: "Proximity talks should eventually lead to direct negotiations."

"There is no alternative to direct negotiations," said Ban, who heads to the Middle East after Friday's meeting with U.S. Secretary of State Hillary Clinton, Russian Foreign Minister Sergei Lavrov and Ashton.

"The quartet meeting is being held at a crucially important time," he said.

Ban also reiterated criticism of the plans for more homes for Jews near East Jerusalem, which Israel announced last week during a visit by U.S. Vice President Joe Biden.

"We have been very much frustrated by what has happened on the ground," said Ban. "Israel has announced a new settlement plan ... that has been strongly condemned by the quartet."

The global powers "have been frustrated be not being able to see progress on the ground," he added.

Palestinian President Mahmoud Abbas has indicated there would be no proximity talks unless Israel froze all settlement building.