Israel scrambled Tuesday to sidestep President Barack Obama's demand for a West Bank settlement freeze with a diluted counteroffer to Washington, AP reported.
But Prime Minister Benjamin Netanyahu's compromise - to take down some squatter camps in exchange for permission to keep building in established settlements - was quickly rejected by hard-liners in his own coalition.
The dispute underscored Netanyahu's difficult juggling act. He's trying to avert a crisis with the U.S. over settlements, while keeping his pro-settlement governing coalition intact and forging ahead with construction, such as the rows of apartment blocks going up in this rapidly expanding Israeli city in the West Bank.
However, Obama and U.S. Secretary of State Hillary Rodham Clinton have spoken in recent days about halting all settlement activity without exception, suggesting Netanyahu may have little room to bargain.
Also, the 2003 "roadmap" for peace negotiations, which Israel accepted, bans all construction in settlements and orders the removal of the outposts.
Cutting a deal with Israel on settlements could also hurt Obama's credibility and key policy goals, including improving U.S. relations with the Arab world and moving toward the creation of a Palestinian state in a Mideast peace deal. There was no immediate reaction from Washington.
Palestinian President Mahmoud Abbas is putting settlements at the center of his talks with Obama at the White House on Thursday, and has said he won't resume peace talks without a freeze.
Without a moratorium on settlements, Obama could also have a tough time persuading Arab countries to take his suggestion and begin moving toward normalizing relations with Israel.
Continued construction could also close the door to a two-state solution, defined by Obama as a key U.S. interest. Nearly half a million Israelis have moved into homes built during the last four decades on land the Palestinians want for their state.
However, some supporters of a two-state solution argue that Obama is wasting political capital on the interim step of a freeze, and should focus on getting quickly to a peace deal that would determine the fate of the settlements by drawing Israel's permanent borders.
The U.S. has long criticized settlements as obstacles to peace but never succeeded in getting Israel to halt construction, which continued even during periods of peace negotiations. More than 3,200 apartments were being built in the West Bank in 2008, and the Israeli settlement monitor Peace Now says 6,000 more units are in various stages of planning.
Currently, nearly 300,000 Israelis live in the West Bank, in addition to some 180,000 in east Jerusalem, the Palestinians' would-be capital.
Maaleh Adumim, near Jerusalem, has grown from a hilltop outpost in 1975 into a city of 35,000, complete with shopping mall and industrial zone.
At a sprawling construction site on the settlement's eastern edge, laborers erected scaffolding on a recent morning, with the pounding of hammers echoing across the Judean Desert.
Apartment sales are brisk, said an employee in an on-site sales office, adding that five contractors have projects in Maaleh Adumim with hundreds of units going up.
One contractor, Electra Construction, is building 52 apartments. Israela Peer, a customer service representative, said nearly all have been sold, at 1.1 million shekels - about $275,000 - for a five-room apartment. That is $50,000 less than a comparable property in central Israel.
Successive Israeli governments have said they need to keep building to accommodate "natural growth" for families to have children or for the adult offspring of settlers to buy homes near their parents.
"If in a certain community there are another 14 kids next year of kindergarten age and we have to open them a new kindergarten - what's the big deal?" Defense Minister Ehud Barak said this week.
Such arguments may not go over well with the Americans. In a TV interview, Clinton specifically said the U.S. opposes construction for "natural growth."
Netanyahu and Barak came up with their counter proposal in recent days, according to Israeli officials who spoke on condition of anonymity because they were not authorized to brief reporters.
Their plan is to promise to dismantle 22 wildcat settler outposts over the next few weeks, in exchange for the U.S. dropping its demand for a freeze, the officials said. Barak is to present the idea in Washington next week.
Israeli Foreign Minister Avigdor Lieberman dismissed Netanyahu's proposal Tuesday, saying Israel should not take any action until it has devised a comprehensive plan for tackling its problems with its neighbors.
"I promise you, no outposts will be dismantled tomorrow, and not two weeks from now," he told Army Radio.
Settler leader Dani Dayan said he believes Netanyahu can be deterred from dismantling most outposts and warned that a freeze would bring down the government.
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