Occupied Jerusalem: Israeli plans to build more homes in and around occupied Arab East Jerusalem came under fire on Tuesday from Palestinians who see the city as capital of their future state, casting another shadow over troubled peace talks.

Israeli officials hailed "progress" after negotiators met for the first time for two consecutive days. But comments from ministers threatening new attacks on the Gaza Strip and vowing to expand Jewish colonies angered Palestinian leaders. On both issues Israeli Prime Minister Ehud Olmert is under pressure from domestic opponents and from within his fragile coalition to take a tougher stance against Palestinian demands.

Meetings

With little public sign of movement since US President George W. Bush helped relaunch long-stalled peace talks in November, the chief negotiators, Israeli Foreign Minister Tzipi Livni and former prime minister Ahmad Qorei met both Monday and yesterday, Livni's spokesman Arye Mekel said. It was the first time they had met in such quick succession. Israeli officials close to Livni said progress was being made in the talks.

But Palestinians pointed to new signs of trouble yesterday when Israel's Housing Ministry said preparations were under way to build up to 1,100 new homes in and around occupied Arab East Jerusalem, which Palestinian President Mahmoud Abbas wants to be the Palestinian capital.