More Israeli settlement homes

Israeli Housing Minister Uri Ariel said in a statement on Thursday that the new construction was a "fitting Zionist response to the formation of a Palestinian terror government."

The planned housing, he added, was "just the beginning."

The development follows Israeli anger at the US' decision to work with the newly-formed unity government in the West Bank and Gaza. Palestinian President Mahmoud Abbas announced the merged government, which includes the support of Hamas, on Monday.

US Secretary of State John Kerry defended Washington's decision during a visit to Lebanon on Wednesday. He said it did not conflict with US and European Union policy that prohibits working with Hamas until the Islamist movement gives up violence and recognizes Israel and past peace deals.

Abbas had "made clear that this new technocratic government is committed to the principles of non-violence, negotiations, recognizing the state of Israel, acceptance of the previous agreements," said Kerry.

"Based on what we know about the composition of this technocratic government, which has no minister affiliated to Hamas and is committed to the principles that I describe, we will work with it as we need, as appropriate," he added.

The dispute strains the normally-strong US-Israeli relationship after the latest Washington-brokered peace talks broke down. Kerry said that the collapse of the negotiations was due in part to Israel's insistence on continuing settlement construction.

The Construction and Housing Ministry's announcement of the new plans is one of several necessary steps before construction can begin.

dr/msh (AFP, AP, Reuters, dpa)