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U.S. Secretary of State Hillary Clinton on Wednesday blasted Israel's plans to demolish Palestinian homes in East Jerusalem as a violation of its international obligations and "unhelpful" to Middle East peace efforts.

"Clearly this kind of activity is unhelpful and not in keeping with the obligations entered into under the 'road map'," Clinton said, referring to the long-stalled peace plan.

"It is an issue that we intend to raise with the government of Israel and the government at the municipal level in Jerusalem," she added at a joint news conference with Palestinian President Mahmoud Abbas.

Clinton said she planned to take up the issue with the incoming Israeli government, which is expected to take office in the coming weeks.

Israel has in recent days issued orders for the demolition of 80 Palestinian homes in East Jerusalem it says were built illegally.

But Palestinians say they cannot receive proper building permits from Israeli authorities, and the planned demolitions are means to assert Israel's control over the disputed city.

Clinton also displayed strong public support for Abbas. "The Palestinian Authority is the only legitimate government of the Palestinian people," she told the news conference.

The Palestinian president has steadily lost support at home, particularly after a year of inconclusive peace talks with Israel. At the same time, his Islamic militant Hamas rivals, who seized Gaza from him in 2007, are widely seen as emerging stronger from Israel's recent military offensive against them.

Talking to reporters after meeting Clinton, Abbas criticized Iran, one of the main backers of Hamas. He charged that Iran is trying to deepen the Palestinian split and said, "Iran needs to take care of its own issues and stay away from intervening in Palestinian affairs."

Abbas, meanwhile, was expected to ask Clinton to push Israel to freeze West Bank settlements and open Gaza's blockaded borders.

Senior Abbas aide Saeb Erekat said the Palestinian leader was seeking a tougher U.S. stance toward Israel and would raise specific Israeli construction projects in Jerusalem with Clinton.

"The main point is that the Israeli government needs to accept the two-state solution and ... that it stop settlement expansion," Erekat said, hours before the meeting.

Abbas was also expected to tell Clinton that the Palestinian Authority would not agree peace negotiations unless Israel agreed unequivocally to a two-state solution, Saleh Rafat, a member of the Palestine Liberation Organization's Executive Committee.

Clinton began her first West Bank trip as secretary of state by meeting with Palestinian Prime Minister Salam Fayyad in the morning and Abbas in the afternoon. She arrived in Ramallah under heavy security, with Palestinian police with assault rifles lining access roads.

A day after pledging the new Obama administration would always protect Israel's security, Clinton delivered a message of support for Abbas' Palestinian Authority and repeated that the U.S. was committed to the establishment of a Palestinian state.

"We are very committed to your efforts in this leadership of President Abbas," Clinton told Fayyad.

She also praised Fayyad's plan for rebuilding Gaza, outlined Monday at an international pledging conference for the territory, damaged heavily in a recent Israeli offensive against Hamas.

"I've told everyone that it was exactly what was required," said Clinton, who attended the conference. Donors raised $5.2 billion for Gaza and Fayyad's government.

During her visit to Ramallah, Clinton met briefly with young Palestinians studying English, and announced a U.S. initiative to help poorer Palestinian students attend four-year Palestinian universities and give grants to other Palestinians to attend U.S. schools.

"For a Palestinian state to be prosperous, accountable to its people and be able to live up to its obligations in the international community, it has to have more people who can do the job in the 21st century," she said.

The Palestinians are watching closely for signs of change in U.S. policy toward their conflict with Israel. Even Palestinian moderates were disappointed with the previous administration's failure to take Israel to task for accelerated construction of Israeli settlements in the West Bank.

Hamas spokesman Fawzi Barhoum, meanwhile, said Wednesday that Clinton's remarks throughout her Mideast trip have been totally biased in favor of the "Zionist occupation and do not reflect any change in American foreign policy."

Clinton: 'Economic peace' is futile without diplomacy

Clinton was critical on Tuesday of the "economic peace" plan of Prime Minister-designate Benjamin Netanyahu and said that an economic initiative without a political solution had no chance to succeed.

In her first visit to Middle East since the Obama administration took office, Clinton said during her meetings here that the U.S. would coordinate with Israel its dialogue vis-a-vis Iran and would work toward a "regional security umbrella."

During a meeting with Defense Minister Ehud Barak the Secretary of State said that Israel must do more to open the border crossings into the Gaza Strip to larger amounts of humanitarian assistance so that civilians there could get some relief. She also appealed for a broadening of the list of items that it considers "humanitarian aid," and called the humanitarian situation there problematic.

Last week Haaretz reported that messages had been relayed from senior U.S. officials signaling the Secretary of State was angered by the delays in the flow of humanitarian aid into the Gaza Strip and the apparent obstacles that defense officials here raised over the types of goods that they considered essential to minimize civilian suffering.

The secretary of state told Barak that it is important to be sensitive to the needs of the Palestinian civilians.

During her meeting with Netanyahu, Clinton said that it is important for Israel to consider whether the closing of the crossings may be more harmful than it is useful.

Barak told Clinton that since the completion of Operation Lead Cast, 127,000 tons of food, medicine and equipment was delivered through the crossings. He also said that more than 12 million liters of fuel was delivered to power the electric plant in the Gaza Strip.

In addition to her meeting with Barak, Clinton also met with President Shimon Peres, Foreign Minister Tzipi Livni, Benjamin Netanyahu and outgoing Prime Minister Ehud Olmert.

Iranian focus

In her meetings the secretary of state focused on Iran and its nuclear program, and the Palestinians.

Clinton stressed before her interlocutors that the Obama administration is committed to a solution of two states for two peoples, which she described as "inevitable."

"We happen to believe that moving toward a two-state solution is in Israel's best interests," Clinton said. "It is our assessment that eventually, the inevitability of working toward a two-state solution is inescapable."

Although Clinton said the U.S. respects other views, the Obama administration believes that there should be no time wasted on the Palestinian question and a Palestinian statehood, describing the creation of a Palestinian state as "also an interest of Israel."

Acknowledging that "a new and creative approach is necessary," Clinton said that the solutions already discussed in the past will not solve the problems.

For his part, Netanyahu told the visiting Secretary of State that he intends to further the diplomatic process with the Palestinians.

The top U.S. diplomat told her Israeli interlocutors that Israel must meet its commitments to the road map, which mainly involve the freezing of settlement construction. Clinton said that the new administration in Washington will continue supporting Israel and its democratically elected government, but it will not hesitate to express its views.

Clinton said that friends sometimes have differences of opinion and promised to express American opinion with clarity and sincerity.

Prime Minister designate Netanyahu said that, "we have found much common language and we agreed to work in cooperation and coordination in order to advance peace and security in the region."

During her meetings Clinton discussed U.S. strategy toward Iran and stressed that Iran was also central during her meetings with Arab leaders at the international donors meeting in Sharm el-Sheikh Monday.

'Security umbrella'

Clinton said that the U.S. would like to form a regional security umbrella against Iran's nuclear threat.

She also said that the U.S. would consult and coordinate its activities with Israel regarding a future dialogue with Iran and emphasized that dialogue does not mean accepting a nuclear Iran.

Clinton stressed that there should be no confusion between American willingness to speak with Iran and their commitment to prevent Tehran from acquiring nuclear arms.

The secretary of state also said the U.S. intends to seek further sanctions against Iran, in parallel with dialogue, especially in an effort to limit the range of missiles in Iran's arsenal.