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NEW YORK - United Nations Secretary-General Ban Ki-moon has given his backing to the increasing international support for the declaration of an independent Palestinian state.

In remarks read this week at the UN Latin American and Caribbean Meeting in support of Middle East peace, Ban stated it was a "crucial time" for the Israeli-Palestinian peace process. His statements included stiff criticism of Israel, denouncing its "policy of occupation" and "continued settlement construction in the West Bank and East Jerusalem."

"Time is of the essence in realizing the two-state solution," Ban said. "The occupation that started in 1967 is morally and politically unsustainable, and must end. The Palestinians have a legitimate right to the establishment of an independent and viable state of their own."

Though a large part of Ban's statements reiterated positions he has articulated in the past regarding the Israeli-Palestinian conflict, diplomats and commentators in New York agreed yesterday that formulations and tone evident in his remarks reflected a toughening of his criticism of Israel.

"The secretary-general made it absolutely clear that Israel will pay a steep political price for the continuation of an impasse in contacts with the Palestinians," diplomats in New York stated yesterday.

While Ban was actually in London, participating in a summit of foreign ministers representing states in the anti-Gadhafi coalition, his statement was read at the meeting, held in Montevideo, Uruguay.

"The target dates for reaching an Israeli-Palestinian agreement on permanent status issues and completing the Palestinian Authority's two-year state-building program are fast-approaching. Yet, the Israeli-Palestinian negotiations remain at a worrying standstill. We must intensify efforts to break the deadlock," Ban said.

For the first time, he related explicitly to the division of Jerusalem. "A way must be found for Jerusalem to be the capital of two states, Israel and Palestine, while guaranteeing access to holy sites under arrangements accepted by all."

The UN secretary-general also attacked Israel's settlement policy. "Israeli construction in the West Bank and East Jerusalem is illegal, and it violates the road map plan," he stated, denouncing the "demolition of Palestinian homes in East Jerusalem."

Diplomatic sources in New York said yesterday that Ban's statements reflect mounting sentiment in the United Nations, as well as the European Union, for increased involvement in the decades-long conflict, and for challenging America's monopolistic handling of the issue.