Israel plans to build 370 housing units in Har Homa, a neighborhood in the section of Jerusalem considered occupied territory under international law. The area is also claimed by the Palestinians as the capital of their future state, along with the West Bank and Gaza Strip, other areas seized by Israel in the 1967 Arab-Israeli War.
"When we build in Jerusalem, and we will build in Jerusalem, everyone knows that there is no chance that the State of Israel will give up a neighborhood like Har Homa. It is an inseparable part of Jerusalem," Ehud Olmert said at a news conference with the visiting German chancellor, Angela Merkel.
The international "roadmap" for peace between Israel and the Palestinians requires Israel to halt any construction on occupied territories.
Olmert also said that peace talks with the Palestinians would resume later on Monday.
Recent months have seen an increase in tensions in Israeli-Palestinian relations with tit-for-tat attacks and killings taking place on a regular basis, including a recent Israeli raid on the Hamas- controlled Gaza Strip that left 120 dead, and the shooting of eight Israelis in a Jewish seminary in Jerusalem.
