Israeli foreign minister criticizes settlement plan

By Allyn Fisher-Ilan

CAMBRIDGE, Massachusetts (Reuters) - Israeli Foreign Minister Tzipi Livni on Wednesday criticized a plan to expand a Jewish settlement in occupied land as unhelpful but insisted it would not prejudice a final peace deal under negotiation with Palestinians.

Israel's plan to build hundreds of homes in a settlement outside Jerusalem, announced after a Palestinian gunmen killed eight Israelis at a religious seminary last week, has sparked an international outcry that was joined by U.S. Secretary of State Condoleezza Rice on Wednesday.

In an apparent bid to ease pressure from Israel on the issue that has threatened to derail fragile peace talks, Livni told students at Harvard University in Cambridge, Massachusetts:

"It's not the Israeli government policy to expand settlements these days."

Livni, formerly of Israel's Mossad spy agency and now a top deputy to Israeli Prime Minister Ehud Olmert, characterized the planned construction as private building and "not dramatic."

"Basically, I don't think that it helps," Livni said. "We decided to stop settlement activities."

She added that Israel would "need to dismantle more settlements" under a peace deal for a two-state solution to the Israeli-Palestinian conflict that U.S. President George W. Bush has said he hoped to see before he leaves office in 2009.

Livni said Israel's 2005 troop pullout from the Gaza Strip, which removed some 8,000 Jewish settlers, was a signal Israel would eliminate more controversial enclaves for peace.