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"Israeli Prime Minister Benjamin Netanyahu made it clear on Monday settlement building in east Jerusalem would continue, in a move likely to further heighten tensions with key ally the United States.
"Construction will continue in Jerusalem as this has been the case over the past 42 years," he told members of his Likud party. Israel occupied mainly Arab east Jerusalem in the 1967 Six Day War and later annexed it in a move not recognised by the international community.
Israel's go-ahead last week for the construction of 1,600 new homes for Jewish settlers in east Jerusalem infuriated Washington, particularly since it coincided with a visit by US Vice President Joe Biden aimed at promoting renewed peace talks with the Palestinians.
Israel's ambassador to Washington said bilateral relations have hit a 35-year low.
"Israel's relations with the US are facing the most severe crisis since 1975," the Yediot Aharonot newspaper quoted ambassador Michael Oren, a prominent Middle East historian, as telling consuls in the United States during a telephone briefing over the weekend."
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