Netanyahu pledges to be a 'partner for peace'

Benjamin Netanyahu, on the brink of becoming Israel's Prime Minister, promised yesterday that he would "negotiate with the Palestinian Authority for peace". Mr Netanyhau moved to allay fears of a right-wing government in a speech the day after securing the particpation of the Labour party in his coalition government. He declared: "I think that the Palestinians should understand that they have in our government a partner for peace, for security, for the rapid development of the Palestinian economy".

But Mr Netanyahu's speech, like his coalition agreement with Labour, did not mention the creation of a Palestinian state. And it came amid continuing uncertainty over the fate of settlement expansion plans, particularly in and around East Jerusalem, which Palestinian officials have warned could block any negotiating progress.

Sources in the Yisrael Beteinu party of Avigdor Lieberman, who is set to become foreign minister in the new coalition government, declined to comment on an Army Radio report that Mr Lieberman had made a "secret deal" with Mr Netanyahu for the construction of 3,000 housing units in the so-called E1 corridor between the Maale Adumim settlement and Jerusalem. Housing construction in the corridor was halted under the outgoing prime minister Ehud Olmert and his predecessor Ariel Sharon because of strenuous objections by the US government. The report said that the clause on E1 had been kept out of the published coalition agreement.

Meanwhile, intensive diplomatic efforts were under way last night by the US and Britain to prevent the Jerusalem muncipality from today approving the construction of 20 Jewish settlement housing units on the site of the empty Palestinian Shepherd's Hotel in the inner-city Arab East Jerusalem district of Sheikh Jarrah.

The strategically placed site is only 60 metres from the British consulate general and diplomats have long argued that a settlement would be an unacceptable, and in international law illegal, encroachment on a Palestinian area.