Netanyahu GA - AP - 09/11/10
Prime Minister Benjamin Netanyahu at the GA conference in New Orleans, November 9, 2010. Photo by AP
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Prime Minister Benjamin Netanyahu on Wednesday dismissed renewed furor over Israel's West Bank settlements, calling the international reaction to Israel's latest building plan "overblown".

Anger at plans announced Tuesday for over 1,000 new homes in the Har Homa settlement beyond the Green Line in East Jerusalem was misplaced, Netanyahu said in a television interview with the Fox Business Network, playing down a new diplomatic spat with the United States.

"I think it's overblown...you are talking about a handful of apartments that really don't affect the [peace] map at all contrary to impressions that might be perceived from certain news reports," Netanyahu said. "So it's a minor issue that might be turned to a major issue. I think this is wrong."

Tension over settlements was diverting attention from more important topics, Netanyahu said, claiming that despite continued building in East Jerusalem, which the Palestinians claim as their future capital, an agreement could be reached if both sides wanted it.

"You put the minor issues aside and you deal with the major issues…and you try to fashion a peace deal. If there's a deal to be made there, you'll see it in a year. If there's not a deal, then we won't succeed," he said.

Netanyahu's comments followed a day of tit-for-tat sniping between Israel and the U.S. after the prime minister's office released a statement denying any link between Jewish construction in the city's traditionally Arab eastern half and the lack of progress in peace talks with the Palestinians.

"Jerusalem is not a settlement", the statement said.

The U.S., which is sponsoring peace negotiations, has repeatedly called on Israel to freeze all building beyond the Green Line, including in East Jerusalem, which Israel officially annexed in 1980 – a move never recognized internationally.

"There clearly is a link [between settlements and peace talks," a U.S. spokesman said in response to Netanyahu's statement. "To suggest that this kind of announcement would not have an impact on the Palestinian side I think is incorrect."

But in Wednesday's television appearance, Netanyahu stuck rigidly to the Israel line that it was Palestinian refusal to recognize Israel as a Jewish state, rather than settlements, that had left negotiations deadlocked soon after they began in Washington two months ago.

"Peace is going to be tough... but I think it's in our common interest to get it, Netanyahu said. "It depends on their willingness to recognize Israel, to recognize the Jewish state as we recognize the Palestinian state to end the conflict."

At home in Israel, meanwhile, Cabinet Secretary Zvi Hauser sought to talk dampen media reports of dischord between Netanyahu and the U.S., telling Israel Radio that the Israeli newspapers had "exaggerated" their differences.

Netanyahu went on to rounde on the Palestinians for what he said was their lack of commitment to the talks, amid press speculation that President Mahmoud Abbas may try to bypass negotiations and persuade the United Nations to recognize an independent Palestinine.

"I hope we can get the peace talks back on track," he said."The crucial thing to me is that the only way you can conclude a successful peace negotiation is if you actually engage in it. And I am disappointed with the fact that the Palestinian authorities found ways not to negotiate, to seek a detour, to go to the UN or go elsewhere and avoiding the critical negotiation that we have to engage in."

Har Homa is just the latest in a string of embarrassments for Netanyahu over settlements in recent months.

In March, relations with the Obama administration hit a lowpont when the annoucnement of plans for 1,600 Jewish homes coincided with a visit to Israel by U.S. Vice President Joe Biden. Days later, a scheme to renovate the Shepherd hotel in Eat Jerusalem's Sheikh Jarrakh neighborhood caused the prime minister discomfort during a return trip to the U.S.