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Clinton call to Netanyahu: Israel settlement move a 'deeply negative signal'

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"The secretary said she could not understand how this happened, particularly in light of the United States' strong commitment to Israel's security," added Mr. Crowley.

50,000 housing units reportedly under way

Control over the city was once considered the final and ultimate dispute for Israeli and Palestinian negotiators. But in recent weeks, it has been brought front and center by weekly rioting, demonstrations, and plans for new building projects.

The intensification of the dispute over the city holy to three religions jeopardizes last weekend's agreement to restart peace talks – the first in more than a year. In recent days, the Palestinians have called on the US to force Israel to drop the building project.

"If Israel will continue business as usual with settlements, and the Americans are not in a position to do anything in this regard, that's something that the Palestinian leadership has difficulty living with,'' said government spokesman Ghassan Khatib.

In addition to the 1,600 units announced this week for ultra-Orthodox families in the Jerusalem neighborhood of Ramat Shlomo, the Israeli government has plans for a total of 50,000 more housing units in east Jerusalem in the coming years, Haaretz reported this week.

Israeli parliament speaker: We must say clearly we won't compromise

The building plans outrage the Palestinians who see Israel's building over the Green Line in Jerusalem as a plan to block any compromise in Jerusalem. Israel's government considers the city, which was united in 1967 after 18 years of divided rule, part of the "eternal capital'' of the Jewish state.

Israeli Parliament Speaker Reuven Rivlin said that Israel should be honest with the Palestinians and the US that it will not compromise: "We must say clearly and put it on the table. You can't talk about peace if Jerusalem is divided."

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