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Israel will press ahead with housing construction in its West Bank settlements despite a surprisingly blunt demand from U.S. Secretary of State Hillary Rodham Clinton that all such building stop, an Israeli official said Thursday.

The Israeli position could set the stage for a showdown with the U.S. on the day President Barack Obama meets his Palestinian counterpart, Mahmoud Abbas, at the White House. Abbas has said the freeze of the Israeli settlements will top his agenda in the talks.

Israel contests that new construction must take place to accommodate for expanding families inside the existing settlements, which the U.S. and much of the world consider an obstacle to peace because they are built on land the Palestinians claim for a future state.

When asked to respond to Clinton's call for a total settlement freeze, Israeli government spokesman Mark Regev said that normal life in those communities must be allowed to continue. Pressed on whether the phrase normal life meant some construction will take place in existing settlements, Regev said it did.

He noted that Israel has pledged to build no new settlements and to removeunauthorized Jewish outposts in the West Bank. "The fate of existing settlements will be determined in peace negotiations between Israel and the Palestinians," he said.

Regev's remarks echoed those of Prime Minister Benjamin Netanyahu who has said Israel will continue to allow natural growth in the settlements - a vague term that refers to construction in existing settlements to accommodate growing families.

The new U.S. administration has been noticeably more explicit in its criticismof Israeli settlement policy than its predecessor.

The two countries each have new leaders with strikingly different approaches to Israeli-Palestinian relations, with Netanyahu refusing to endorse Palestinian independence, a notion supported by Obama, his predecessor and the previous Israeli government.

Clinton said Wednesday the U.S. wants a halt to all settlement construction - including their natural growth.

In remarks to reporters in Washington, Clinton said Obama told Netanyahu last week when the two met at the White House that the U.S. sees stopping settlements as key to a peace deal that would see a Palestinian state created alongside Israel.

"He wants to see a stop to settlements - not some settlements, not outposts, not 'natural growth' exceptions," Clinton said. "We think it is in the best interests [of the peace process] that settlement expansion cease. That is our position. That is what we have communicated very clearly. ... And we intend to press that point."

The remarks by Regev on Thursday also indicated that after Clinton explicitly defined natural growth as unacceptable, Israel now appears to be using the term normal life for the same phenomenon.

Earler Wednesday, an Israeli official said that the American administration shows no signs of backing down from its demands that Israel totally freeze settlement growth in the West Bank and open the Gaza border terminals to allow the rebuilding of the Strip.

These conclusions were drawn from talks held in London on Tuesday by Intelligence and Atomic Energy Minister Dan Meridor and advisers to Prime Minister Benjamin Netanyahu with American diplomats, led by U.S. special envoy George Mitchell.

According to the official, the Israeli side claimed in the talks that construction in settlements must be allowed to continue, due to natural growth. They suggested construction be limited to the existing outlines of the settlements, and to define in advance areas in which such construction will be authorized. They also said the demand of Israel to completely freeze the settlement construction was out of order, as the Palestinians have failed to fulfill their part in the first phase of the road map, in particular in combating terrorism.

The American side did not agree to the Israeli suggestions, and in addition to the settlement issue, repeatedly brought up the matter of opening the Gaza terminals to aid and construction materials necessary for rebuilding the Strip.

The same Jerusalem official also said Netanyahu was interested in reestablishing the ministerial committee on illegal outposts, to speed up negotiations with the settlers and allow for the dismantling of 22 outposts constructed after March 2001.