Israeli's Interior Ministry said on Tuesday that its district planning committee had approved a plan for 1,100 new homes in the east Jerusalem settlement neighborhood of Gilo.
"The Israeli interior ministry announced on Tuesday that the plan for 1,100 new housing units in Gilo had passed its district planning committee, and will now be available for public objections for 60 days," a ministry statement said.
The project's passage on Tuesday is just one stage of a lengthy, multi-year approvals process for the planned expansion of the Gilo neighborhood, which lies in Jerusalem's south.
Interior ministry spokesman Roei Lachmanovich told AFP that the project would return to the committee for final discussion and approval after the deadline for public comments has passed.
If the committee gives the project its final approval, only then will tenders be invited from contractors, he said.
The approval Tuesday is likely to stir controversy, as it comes shortly after the international peacemaking Quartet called on Israel and the Palestinians to return to the negotiating table.
The group, composed of the European Union, Russia, the United Nations and the United States, made the call on Friday, just after Palestinian President Mahmoud Abbas submitted a formal bid for U.N. membership for a Palestinian state.
The proposal urged the two sides to begin talks within a month with the goal of reaching a peace deal before the end of 2012.
It made reference to the 2002 Road Map peace plan, which called for a freeze on settlement construction, and urged both sides "to refrain from provocative actions."
But Friday's call did not contain any explicit request for Israel to halt settlement building before peace talks resume, despite Palestinian insistence that they will not negotiate without a settlement freeze.
Peace talks between the two sides have been on hold since late September 2010, when they ground to a halt shortly after they began, with the expiry of a partial Israel moratorium on settlement building in the West Bank.
Israel declined to renew the freeze, and the Palestinians say they will not hold talks while Israel builds on land they want for their future state, a position repeated by Abbas upon his return from the United Nations on Sunday.
In comments published Tuesday, Israeli Prime Minister Benjamin Netanyahu suggested that he would not approve a new freeze.
"We already gave at the office," he told The Jerusalem Post, accusing the Palestinians of using settlement construction as a "pretext."
"It is a pretext they use again and again, but I think a lot of people see it as a ruse to avoid direct negotiations," he said.
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