Foreign Minister Avigdor Lieberman said Wednesday that there was no reason why building should not restart in the major West bank settlement after a 10-month freeze expires next month.
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The determination to continue building is likely to alarm Palestinians, who are pushing for an Israeli promise to continue the freeze ahead of peace talks in Washington, due to start on September 2.
Palestinian negotiators have repeatedly threatened to walk out of talks if the freeze is broken.
"We cannot punish tens of thousands of citizens who have served in the army and live in legal communities," Lieberman said. "We should take natural growth into consideration, as did the previous administration."
Israel should not antagonize its allies by building in the Palestinian heartland, he said – but there was no reason not to push ahead with expansion work in big settlements, like Ariel and Ma'ale Adumim, which Israel hopes to retain after an eventual peace deal.
"We should not create unnecessary conflicts - but on the other hand we must not back down and punish our own citizens."
The foreign minister, who leads the ultra-nationalist Yisrael Beiteinu party, also repeated a previous promise to evacuate his own home in the settlement of Nokdim - but only "if we can arrive at a complete peace agreement that will end the conflict".
For the meantime, Lieberman sees little threat to his West bank home and holds little hope that the latest U.S.-sponsored talks will bear fruit.
"The peace process is unlikely to end within the next year, as disagreements between the two sides are too deep," he said.