Israel announces new Jewish homes in Jerusalem area

JERUSALEM (Reuters) - Israel announced plans on Monday to build nearly 700 new homes for Jews in areas of the occupied West Bank it considers part of Jerusalem, a city it has excluded from a limited moratorium on settlement construction.

A spokesman for Palestinian President Mahmoud Abbas condemned the plan, saying new building on territory occupied by Israel since the 1967 Middle East war was illegal.

Under the new blueprint, Israel's Housing Ministry invited contractors to bid for the construction of 198 housing units in Pisgat Zeev, 377 homes in Neve Yaakov and 117 dwellings in Har Homa, settlements near Jerusalem.

The United States has expressed dismay at previous Israeli building plans in and around the eastern part of Jerusalem, which Israel captured in 1967 and where Palestinians want to establish the capital of a future state.

Israel has declared all of Jerusalem its indivisible and eternal capital, a claim not recognized internationally. It describes Pisgat Zeev, Neve Yaakov and Har Homa as neighborhoods of Jerusalem.

"The Israeli government proves every day that it is not ready for peace," Abbas's spokesman, Nabil Abu Rdainah said, accusing Israel of exploiting what he called U.S. and international inability to halt settlement building.

The construction plan was announced as part of a wider government project to build several thousand new homes in Israel.

Under U.S. pressure, Israeli Prime Minister Benjamin Netanyahu announced in November a 10-month freeze of housing starts in West Bank settlements but said it would not include the municipal borders Israel has defined for Jerusalem.

Abbas has demanded Israel halt all settlement activity, saying he would not resume peace talks until it did so.

Last month, Israel aroused international criticism when it approved the building of 900 homes for Jews at Gilo, where 40,000 Israelis already live on land annexed to Jerusalem after the 1967 conflict.

About 500,000 Israelis live in the West Bank and East Jerusalem among 2.7 million Palestinians. The World Court has said the settlements are illegal and Palestinians say the enclaves could deny them a viable state.

(Additional reporting by Ori Lewis in Jerusalem and Ali Sawafta in Ramallah; Editing by Andrew Dobbie)