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Prime Minister Benjamin Netanyahu on Sunday rebuffed U.S. calls to impose a freeze on all settlement activity in the West Bank, setting the stage for friction with President Barack Obama.

"We do not intend to build any new settlements, but it wouldn't be fair to ban construction to meet the needs of natural growth or for there to be an outright construction ban," Netanyahu told his cabinet, according to officials.

The note of defiance came less than a week after Netanyahu held talks in Washington with Obama, who wants Israel to halt all settlement activity, including natural growth, as called for under a long-stalled peace "road map".

Netanyahu's comments reaffirmed a position he took in his bid for the premiership in a February election. By natural growth, Israel refers to construction within the boundaries of existing settlements to accommodate growing families.

Obama was expected to prod Netanyahu and Palestinian President Mahmoud Abbas to resume long-stalled peace talks during a major speech in Cairo early next month.

Abbas has ruled out restarting those talks until Netanyahu, whose right-leaning government took office on March 31, commits to a two-state solution and halts settlement expansion.

Obama has surprised Israel with his activism on the settlement issue, but it is unclear how much pressure he will put on Netanyahu to freeze construction entirely, Israeli and Western officials said. Former President George W. Bush called for a freeze but building continued largely unchecked, Israeli anti-settlement advocacy groups say.

Half a million Jews live in settlement blocs and smaller outposts built in the West Bank and Arab East Jerusalem, all territory captured by Israel in the 1967 Six-Day War.

Mark Regev, a spokesman for Netanyahu, said the fate of existing settlements should be decided in negotiations with the Palestinians. "In the interim period, we have to allow normal life in those communities to continue," he said.

Netanyahu has so far balked at committing to entering negotiations with the Palestinians on territorial issues.

A senior Israeli official, speaking on condition of anonymity, said Netanyahu's government hoped to sidestep U.S. pressure by committing to uproot smaller hilltop outposts built without official authorization, a step also set by the road map.

"Moving on outposts is relatively easy" compared to freezing growth of larger settlements, which Israel wants to keep as part of any future peace deal, the Israeli official said.

Last week, Israel flattened a small outpost near the West Bank city of Ramallah, but residents returned to rebuild.

Barak: Israel to clear 22 outposts by force if needed

Ahead of Sunday's cabinet session, Defense Minister Ehud Barak said Israel would remove 22 other outposts, preferably through negotiations, but gave no timeline. However, he warned that settlers would be evicted forcefully if they resisted.

"The 22... have to be dealt with now in a responsible, appropriate manner, first of all, exhausting all efforts at dialogue and if that proves impossible, then unilaterally, using force if necessary," he said.

Barak, the official authorized to order demolitions, has repeatedly made imilar pledges since he became defense minister two years ago. Much of that time he has unsuccessfully been trying to reach an agreement with settlers to leave voluntarily. He gave no timeline for the promised demolitions.

Earlier Sunday, Senior Likud minister Yisrael Katz on Sunday criticized calls for Israel to freeze construction in West Bank settlements.

"The government's agenda must not appear to resemble a manhunt against the settlers in Judea and Samaria," said Katz, the transportation minister, referring to the West Bank.

His comments came after United States Secretary of State Hillary Clinton took a hard line against settlement construction last week, including a call to freeze building for natural growth.

Speaking at the weekly cabinet meeting, Katz added: "There are some things to which we won't be able to agree, such as the drying up of the settlement of Judea and Samaria. Even [veteran leftist politicians] Yossi Sarid and Ran Cohen didn't do this."

Lieberman: Only evacuate outposts under peace plan

Foreign Minister Avigdor Lieberman, meanwhile, on Sunday said that Israel should only evacuate outposts as part of a comprehensive peace plan.

"The evacuation of outposts needs to be part of a sensitive, comprehensive program and not piecemeal," he said before Sunday's cabinet meeting.

Lieberman also reiterated his position that the road map peace plan, a 2003 United States-backed initiative, was the only valid peace process for Israel.

He said the process was a gradual one that would protect Israel's interests.

"A return to the borders of '67 in today's circumstances - as they are pressuring us [to do] - this is not peace, not security and it is not the end of the conflict. The result will be the transfer of the conflict to inside the '67 borders," Lieberman said.

The foreign minister said in April that Israel would only follow the road map and was not bound by commitments it made at the 2007 Annapolis peace conference to pursue creation of a Palestinian state.

The foreign minister's comments came despite mounting pressure from the United States for Israel to take immediate action on the issue.