Maale Adumim, east of Jerusalem, is the largest Jewish settlement. (Ahmad Gharabli/AFP/Getty Images)
Israeli officials have said work would continue on 2,500 settler homes being built in the occupied territory, and Netanyahu reaffirmed his position in remarks to a legislative panel, before talks on Tuesday with U.S. envoy George Mitchell.
That falls short of Palestinian President Mahmoud Abbas's conditions for resuming talks on establishing a Palestinian state, so Mitchell still must square several diplomatic circles if Obama is to get his wish to see Abbas and Netanyahu meet as early as at next week's U.N. General Assembly in New York.
"They (Americans) asked us for a complete freeze and we told them that we will not do this," Netanyahu was quoted as saying by a parliamentary official, who briefed reporters on his comments to the Foreign Affairs and Defence Committee.
"I told the Americans we would consider reducing the scope of construction," the premier said, according to the official.
"But there has to be a balance between the desire to make progress in political negotiations and the need to allow inhabitants of Judea and Samaria to continue to lead normal lives," Netanyahu said, using biblical terms for the West Bank.
Israel Radio quoted Netanyahu, who heads a right-leaning government, as saying any construction restrictions would be in effect only for a limited time, but said he gave no timeframe.
Abbas, also due to meet Mitchell on Tuesday, has said he would not return to peace negotiations with Israel until it froze settlement activity in line with a 2003 peace "road map".
Talks have been suspended since December.
At its weekly meeting, the Palestinian cabinet demanded Israel agree to a "comprehensive halt to settlement activities including 'natural growth'," a term that refers to construction to accommodate growing settler families.
Some 500,000 Israelis live in the West Bank and in Arab East Jerusalem, also captured in 1967, alongside some three million Palestinians. The World Court calls the settlements illegal and Palestinians say the enclaves could deny them a viable state.
Package Deal
Mitchell, who arrived in Israel on Saturday, has been trying to prepare a package under which Israel would halt construction in settlements and Arab nations would take initial steps towards recognising Israel.Washington hopes both moves would lead to a resumption of talks. Mitchell and Netanyahu said separately on Sunday gaps needed to be bridged before a settlement deal could be sealed.
In an opinion piece published in The New York Times on Monday, Turki al-Faisal, a former director of Saudi Arabia's intelligence services, said regional recognition of Israel could come about only after it removed all settlements.
"We are willing to embrace the hands of any partner in peace, but only after they have released their grip on Arab lands," he wrote.
Last week, Israeli Defence Minister Ehud Barak drew a U.S. rebuke by approving 455 building permits in settlements in the West Bank, land Israel captured from Jordan in a 1967 war and which Palestinians want as part of a future state.
The move was widely seen in Israel as a bid to placate settlers before any construction limitations. An Israeli government official said it was a step towards a "package" deal that could include "very severe limitations in the growth of settlements—a possible moratorium".
