Rice attacks Israel over new settlements plans · 40,000 homes to be built in Jerusalem over 10 years · US claims plans are undermining peace talks Toni O'Loughlin in Jerusalem The Guardian, Monday June 16 2008 The US secretary of state, Condoleezza Rice, yesterday accused Israel of undermining peace talks as Israel announced plans to build thousands more homes in settlements in east Jerusalem. Upon arrival in Jerusalem to help the faltering peace talks, Rice expressed her frustration at the Israeli housing ministry announcement of plans to build 1,300 more homes in Ramat Shlomo, a settlement on Palestinian land in east Jerusalem which was captured in the 1967 war. "I do believe that the actions and announcements that are taking place are having a negative effect on the atmosphere for negotiations," Rice said in a joint news conference with Palestinian Authority president, Mahmoud Abbas. "We should be encouraging confidence, not undermining it. No party should be taking steps that could prejudice the outcome." Even as Rice was issuing her strongest criticism of settlement construction to date, Jerusalem's city council unveiled plans to build 40,000 new apartments throughout the city, including units in east Jerusalem, over the next 10 years. "Jerusalem is a growing city which has a population with growing needs and it's impossible to freeze that. It can't happen," a spokesman for Israel's prime minister, Ehud Olmert, said. It is unclear exactly how many of the 40,000 new apartments would be built on contested land. It is the fourth time Rice has visited Jerusalem this year in an attempt to meet the deadline for concluding an agreement to create an independent Palestinian state and coincide with the end of President Bush's term in early 2009. She cautioned against expecting any "blinding breakthroughs". Abbas said the settlements were "the biggest hurdle" in the talks but said the Palestinians would continue talking despite earlier threats to boycott the discussions if the Israelis kept building on disputed land. "We hope that a swift agreement will be reached because the matter has been dragging," Abbas said. While the Palestinians hope to recover land taken in 1967, Israel says there is implicit international acceptance that it will keep its Jewish communities in east Jerusalem. Confusion has shrouded the issue ever since President George Bush told Israel in 2004 that the US would not oppose big Jewish population centres remaining on contested land. As a result, Israel also intends to hold onto the three major settlement blocks in the West Bank. The negotiations were further complicated by talks between Hamas, which rules Gaza, and Israel, via Egypt which have also been dragging on for months. Until last week, Abbas had refused to talk to his political rivals in Gaza. Meanwhile, Israel was yesterday reported to be willing to agree to free Lebanese prisoners in exchange for two soldiers abducted in 2006. The speculation follows the recent exchange between Israel and Hizbullah in which a Lebanese prisoner was handed to the militia in return for the remains of Israeli soldiers. German mediators have been holding secret discussions, between Israel and Hizbullah, to discuss the possibility of exchanging Samir Qantar, who is serving a life sentence for a deadly raid in Israel in 1979, for Ehud Goldwasser and Eldad Regev, whose abduction in 2006 led to the Lebanon war.