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Prime Minister Benjamin Netanyahu believes that despite the crisis with the United States over the plan for new housing in East Jerusalem and the protests by the Palestinian Authority and Arab world, indirect talks with the PA will continue as planned early next week.

"The crisis is behind us," sources in the Prime Minister's Bureau said Thursday. They said proof was the invitation to Netanyahu by U.S. Vice President Joe Biden to meet in Washington in 10 days while Netanyahu visits a meeting of the AIPAC lobby group.

Nonetheless, senior American officials said that even though the crisis is over publicly, it will take time to restore trust between the two sides.

The future of the negotiations was raised during a telephone conversation between Biden and Netanyahu Thursday. Biden also discussed the issue with Palestinian President Mahmoud Abbas.

Biden told the Palestinian leader that the United States opposes settlement construction but is determined to resume talks. He stressed to Abbas that Washington would disapprove of a delay in taking the talks forward.

U.S. Mideast envoy George Mitchell is due to begin a round of indirect talks between Israel and the Palestinians on Monday.

Senior Israeli sources say that the prime minister has expressed confidence that the so-called proximity talks will go ahead as planned.

Netanyahu also welcomed two issues in the vice president's Tel Aviv University speech Thursday. The first was the need to move as quickly as possible to direct negotiations. The second was the need to discuss all core issues and not begin with borders, which is what the Palestinians want.

However, senior Palestinian officials say they will adopt the recommendation of the Arab League's monitoring committee and will not take part in the talks. A senior Israeli source expressed skepticism about the key role the PA seems to have awarded the Arab League regarding the talks.

"It raises a question mark on whether the Palestinians actually want to move ahead," the source said.

During the past two days Netanyahu had his aides verify whether political motives were behind the timing of the latest announcement on new construction in East Jerusalem. Convinced that Interior Minister Eli Yishai had not tried to deliberately foil Biden's visit, Netanyahu and Yishai met.

"This was a display of extreme insensitivity," Netanyahu told the interior minister. "There was no need to push any planning process this week, and I am asking that you adopt procedures that will prevent similar incidents from occurring in the future."

As a diplomatic incident was unfolding in Israel during Biden's visit, Deputy Foreign Minister Danny Ayalon was in Washington for a series of meetings with congressmen and officials at the State Department. He quickly found himself providing explanations for the goings-on in Jerusalem.

"Certainly there was intense criticism at the State Department," Ayalon told Haaretz. "Of course I thought that Jerusalem was always off bounds," he added, meaning that the latest construction freeze did not apply.

"Most of the criticism focused on the timing, and I said that it was poor, unintended and that a serious mistake had occurred that is being looked into. I think they understood. There is no doubt that the Palestinians will try either to foil the proximity talks or try to squeeze further concessions as a result of this story. And I explained to administration officials that there will be no further concessions," he said.

"In any case, there is no change [regarding the new construction] and it's a process of years of construction. And if the Palestinians or the Arab League try to foil the proximity talks, it will merely be an excuse. In any case, I believe that vis-a-vis the Americans, the issue is behind us."