Abbas: Settlements biggest obstacle to peace

US Secretary of State Condoleezza Rice said Sunday that Israeli settlement-building is having a "negative effect" on peace talks with the Palestinians.

At a news conference with Palestinian President Mahmoud Abbas, Rice said, "It's important to have an atmosphere of confidence and trust." She said Israeli announcements on settlement construction weren't fostering that kind of atmosphere.

Israel announced last week it would build 1,300 new housing units in east Jerusalem, which the Palestinians want as their future capital. Israel has approved more than 3,000 new apartments for construction in east Jerusalem and the West Bank since peace talks renewed last year.

The Palestinians claim both areas as part of a future independent state.

President Abbas added that the Israeli construction of settlements was "the biggest obstacle the peace process faces." Abbas spoke at a joint press conference with Rice, held in Ramallah.

Rice and Abbas also discussed Egypt's efforts to broker a ceasefire agreement between Israel and the armed Palestinian groups in Gaza, and the Palestinian president asked the US's most senior diplomat to call on Israel to ease the restrictions on the Palestinian population in the West Bank.

Both Rice and Abbas refused to elaborate on the political crisis in Israel amid the ongoing corruption investigation against Prime Minister Ehud Olmert, but the Palestinian president did comment that "as far as we're concerned Olmert is the prime minister and still enjoys the Knesset's trust, so we are continuing to work with him regardless of everything that is going on around him."

Ali Waked contributed to this report