JERUSALEM — Israel's prime minister acknowledged Wednesday that his government has yet to iron out its differences with the U.S. over Israeli construction in east Jerusalem, a dispute that has stalled American efforts to restart Mideast peace talks.
Benjamin Netanyahu said both countries are still working to find a solution but staunchly defended his government's contentious settlement plans in the disputed holy city, calling them a long-standing Israeli policy.
"There are things we agree on, things we don't agree on, things we are closing the gap on," Netanyahu said of his talks with Washington. "We are making an effort."
The worst crisis in U.S.-Israeli ties in years erupted last month when Israel announced plans to build 1,600 new homes for Jews in east Jerusalem during a visit by Vice President Joe Biden, drawing sharp condemnation from Washington and calls to cancel the construction.
The announcement also derailed U.S.-mediated indirect peace talks between the Israelis and Palestinians just before they were slated to start.
The Obama administration has pressured Israel to halt construction in Jewish neighborhoods in east Jerusalem, the section of the holy city Palestinians claim as the capital of a future state, and has also pushed for a broader building freeze in Jewish settlements in the West Bank.
In November, Netanyahu agreed to a 10-month freeze on most West Bank construction in order to get peace talks started, but refused to include east Jerusalem, which Israel annexed in 1967 and considers part of its capital.
Netanyahu on Tuesday dismissed talk of a crisis with Washington and accused the media of blowing the disagreement out of proportion – despite the tension in U.S.-Israeli ties.
"What is being published doesn't fit what we are talking about," he said. "Apparently the discussion between us is more serious and more to the point than what is generally believed."
The Palestinians, meanwhile, are wary of Netanyahu and his hawkish coalition partners, and have refused to resume direct negotiations until Israel halts all construction in the West Bank and east Jerusalem. The Palestinians claim those territories, along with the Gaza Strip, for their future state.
Palestinian President Mahmoud Abbas did, however, agree last month to return to the negotiating table for indirect talks, only to back off after Israel announced the new construction plans in east Jerusalem.
Netanyahu, however, blamed the Palestinians for the delay in negotiations, saying the Palestinians "simply climbed up the tree on the first day (of talks) and said, 'We're not coming to negotiations, we're setting all kinds of conditions'".
He also said his government has taken steps to boost conditions in the West Bank, removing dozens of military checkpoints and roadblocks in the territory to help revive the Palestinian economy. He also endorsed the concept of Palestinian independence for the first time last year, although with conditions the Palestinians say are unacceptable.
Netanyahu, who leads the hard-line Likud Party, took office in March 2009 on pledges he would take a different approach to peacemaking than his predecessor, Ehud Olmert. The more dovish Olmert has said he offered a broad pullout from the West Bank and some Arab neighborhoods of Jerusalem to the Palestinians.
Peace talks broke down in the waning days of Olmert's term, after Israel launched a bruising military offensive in the Gaza Strip to halt rocket fire coming from the territory.
Also Wednesday, Israel expressed outrage after a report on Israeli TV showed that a street in the West Bank administrative center of Ramallah was named after Yehiya Ayyash, a master Hamas bombmaker blamed for attacks that killed hundreds of Israelis.
The Israeli statement called the decision "an outrageous glorification of terrorism by the Palestinian Authority." Ayyash was killed in 1996 in a blast assumed to have been set off by Israeli agents.