RAMALLAH, Dec 28, 2009 (AFP) - The Western-backed Palestinian Authority on Monday condemned Israeli plans to build new homes for settlers in east Jerusalem and said they were incompatible with peace efforts.

"The Palestinian Authority strongly condemns the new decision to build in east Jerusalem and wonders whether there is a freeze of settlement activity or an intensification of it," chief Palestinian negotiator Saeb Erakat told AFP.

"The American administration needs to realise that the policies of the Israeli government embody settlements and not peace and that their choice is settlements and not peace," he added.

Israel's Channel 10 television reported Sunday that Israel has invited tenders for the building of some 692 new homes in three settlements in mostly Arab east Jerusalem, which the Palestinians have demanded as the capital of their promised state.

There are already some 200,000 Jewish settlers living alongside 270,000 Arab residents in east Jerusalem, which Israel occupied in the 1967 Six Day War and annexed later in a move not recognised by the international community.

The Palestinians have refused to restart peace negotiations suspended a year ago during the Gaza war unless Israel halts all settlement activity in the occupied West Bank, including east Jerusalem.

Israel has agreed to a 10-month moratorium on building starts in the West Bank excluding public buildings and projects already underway. The partial freeze does not include east Jerusalem.

On November 16, Israel gave its approval for 900 new housing units in another east Jerusalem settlement in a move that drew a strong rebuke from its US ally, which has been pressing both sides to restart peace talks.

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Copyright AFP 2009.