Netanyahu defies Obama on Israeli settlement freeze

By Adam Entous

JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu on Sunday rebuffed U.S. calls for a full settlement freeze in the occupied West Bank and vowed not to accept limits on building of Jewish enclaves within Jerusalem.

The note of defiance set the stage for a possible showdown with U.S. President Barack Obama's administration, which, in talks with Netanyahu in Washington last week, pressed for a halt to all settlement activity, including natural growth, as called for under a long-stalled peace "road map".

"The demand for a total stop to building is not something that can be justified and I don't think that anyone here at this table accepts it," Netanyahu told his cabinet, referring to Jewish settlements in the West Bank, according to an official.

Netanyahu said Israel had no plans to set up any new West Bank settlements. But he told Obama, according to the official, that his government "does not accept limitations on building" within what Israel defines as its capital, the Jerusalem municipality, an area that includes Arab East Jerusalem and parts of the West Bank captured in a 1967 Middle East war.

Palestinians want an independent state in the West Bank and the Gaza Strip with its capital in Jerusalem.

Netanyahu's comments reaffirmed a position he took in his bid for the premiership in a February election. By natural growth, Israel refers to construction within the boundaries of existing settlements to accommodate growing families.

Obama was expected to prod Netanyahu and Palestinian President Mahmoud Abbas to resume long-stalled peace talks during a major speech in Cairo early next month.

Abbas has ruled out restarting those talks until Netanyahu, whose right-leaning government took office on March 31, commits to a two-state solution and halts settlement expansion.