US Vice President Joe Biden publicly scolded Israel yesterday over a Jewish settlement plan, saying it was undermining peace efforts after Palestinians agreed to US-mediated talks.

"It is incumbent on both parties to build an atmosphere of support for negotiations and not to complicate them," Mr Biden said in a media statement alongside Palestinian President Mahmoud Abbas in the West Bank city of Ramallah.

"Yesterday the decision by the Israeli government to advance planning for new housing units in East Jerusalem undermines that very trust, the trust that we need right now in order to begin ... profitable negotiations," Mr Biden said.

In Jerusalem, an Israeli Cabinet minister apologised for what he termed "real embarrassment" caused to Mr Biden by the news on Tuesday that Israel would erect 1,600 settler homes in an area of the occupied West Bank it annexed to the holy city.

Israel's announcement of the project changed the tone of a visit in which Mr Biden had focused on reassuring Israelis that President Barack Obama was committed to their security in the face of a possible Iranian nuclear threat.

Aides to Israeli Prime Minister Benjamin Netanyahu said he had been blindsided by the announcement of the plan by the Interior Ministry, run by Shas, an ultraorthodox, nationalist party that is a key member of his governing coalition.

Mr Abbas, who agreed to indirect talks with Israel after he had made a settlement freeze a condition for resuming peace negotiations, urged Israeli leaders to cancel the decision.

But the Western-backed Palestinian leader gave no indication the so-called "proximity talks" would not proceed. No date, venue or agenda has been set.

"The American Administration must put pressure on Israel so the indirect talks are not obstructed," said Nabil Abu Rdainah, an Abbas aide.

European Union foreign policy chief Catherine Ashton called on Israel to reverse the settlement decision and avoid taking unilateral actions. Mr Biden made no reference to any postponement. He spoke of "indirect talks being launched" and said they should lead to direct negotiations.

He said the US would hold both sides accountable for any statements or actions "that inflame tensions or prejudice the outcome of talks, as this decision did" - a reference to the settlement plan.

The Arab League in Cairo, which last week endorsed a four-month framework for the talks, called an urgent meeting of a committee overseeing the process.

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