The Labour party said it had decided not to seize the land because of the Likud party's determination to vote with Arab and Communist parties in the Knesset, which would have brought down the government. Likud approves of the confiscations but said it was voting for no-confidence motions proposed by Arab parties because its priority was to defeat the Prime Minister, Yitzhak Rabin.
"We were prepared to stand up to the whole world on this issue," Mr Rabin said later. "The last thing I expected was that Likud and the opposition parties would damage an effort to expropriate land in Jerusalem. I never considered Likud would chose to bring down the government over the unity of Jerusalem." The Foreign Minister, Shimon Peres, also blamed the opposition.
The United States yesterday welcomed Mr Rabin's decision. "We didn't believe the previous decision was helpful to the peace process," said a State Department spokesman.The US had vetoed a UN Security Council resolution condemning Israel for the planned confiscation, arguing that the issue should be resolved by the Israelis and Palestinians. "We used our veto reluctantly," a senior State department official said privately, adding: "It was the right decision because the issue couldn't be allowed to drift into the international orbit."
There is no doubt the Israeli government wanted to get off the hook over the proposed confiscation of 131 acres in Jerusalem, which attracted Palestinian and international condemnation. After a cabinet meeting yesterday afternoon, Mr Rabin appears to have found a way of doing so. He has 58 seats in the 120-member Knesset and can normally rely on five Arab members for support. Bibi Netanyahu, the Likud leader, can scarcely accuse Mr Rabin of surrendering to Arab pressure, because Likud was teaming up with the Arab parties to try to bring him down.
After returning from Gaza, where he met the PLO chairman, Yasser Arafat, Mr Peres said the government would freeze the confiscation decision. Earlier he told Mr Arafat that no more land would be confiscated in Jerusalem, though Israeli officials have said this refers to land for housing and not for security or roads.
Mr Rabin miscalculated the impact of the original confiscation of 530 dunams (131 acres) of land, 330 dunams in the Beit Hanina area of north Jerusalem and 220 dunams from Beit Safafa in the south. It was the biggest confiscation in the city for 15 years. Although there have been previous expropriations, this one became a symbol of Palestinian disappointment that the Oslo agreement of 1993 was not protecting their rights. It also mobilised Arab states, which cannot afford to be seen as laggard in protecting a holy city such as Jerusalem.
Mr Arafat has done little to oppose the confiscation, his inactivity attracting criticism from Palestinians.
He refused to suspend negotiations and even asked the Arab Democratic Party to drop its no-confidence motion.